The markets are full of optimism - November 12, 2017
Prices are continuously rising on stock markets: S&P500 just hit a historical record at 2597 points. Investment and hedge funds have been pouring money into the markets and even a central bank is spending big. But there are others who wait for a correction.
Investors seem to be extremely optimistic about stock markets as S&P500 hit a new high at 2597 points. With this, another historical record came: it’s been 250 days without a 3% plus correction on the American stock market.
Markets are having a good time in general, this year there were other records like 109 days without a bigger than 1% plunge in a day. That streak is over, but optimism is still here.
Investors spent a lot
In the last months, investment and hedge funds spent a lot of money on the stock markets. They are hitting record low cash reserves that hasn’t been seen for a while. Why? Because they are spending all their cash on stocks.
But not only funds went all in. Swiss central bank, for example, spent a lot of money on stocks, adding up to a total of $90 billion at the end of September. They spent this mostly on US based portfolios, including Apple stocks. This is even more interesting knowing that their main task is not investing in stocks.
Not everyone is optimistic
Some are not this optimistic about stock markets. Legendary investor Warren Buffett, for example, has a cash reserve of $80-100 billion in his funds and he’s not investing it at the moment.
It seems to be obvious that he’s waiting for a market correction to start spending that huge amount. It’s quite understandable: the main rule of investing is to buy low and sell high, and now prices are too high for many to start buying.
A correction is expected
Not only Warren Buffet expects a market correction. Usually the big spending of hedge funds is followed by corrections and we’ve seen they had spent most of their cash already. For a while now, we ourselves are expecting a smaller market correction around 5-10% which seems more and more inevitable.
That correction might be a good chance to start investing at lower prices. Still, the rate of investors who think markets are bullish are at record high, so this correction may come unexpected to many.
Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.