Asset managers go all in… Top is in?

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Amidst the soaring optimism in the financial markets, a pressing question has emerged: “How soon until the S&P 500 tops 6,000?” TheStreet poses this query as asset managers display an unprecedented level of bullishness, raising concerns about a potential market bubble.

The fervor is particularly evident in the prolonged bullish stance on U.S. stocks, with asset managers positioning themselves in a manner that suggests unwavering confidence. The S&P 500, excluding technology stocks, is hitting all-time lows relative to the S&P 500 technology index, signaling a potential disconnect between different sectors.

The dominance of the technology market, reminiscent of the dot-com era, has persisted, but a noteworthy shift is occurring. According to reports, individuals aged 55 and older, who constitute 80% of stock-market ownership in the U.S., are becoming more inclined to sell if the economy faces a downturn. This demographic trend, as highlighted by Rosenberg Research, raises concerns about the stability of the market, especially given the potential impact of a recession.

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The dynamics become more complex as companies prioritize share buybacks over capital expenditures and research initiatives. Critics argue that this approach favors insiders while neglecting broader economic activities that contribute to job creation and overall economic strength. The focus on share buybacks could potentially divert resources from essential investments in areas like research and development.

JPM’s analysis adds another layer to the apprehension, revealing that semiconductor inventory levels remain at extreme highs. The looming possibility of destocking in the upcoming quarters might exert pressure on demand, leading to weaker pricing and margins for the sector. This situation introduces additional uncertainties into the market, challenging the sustainability of the current bullish sentiment.


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