While the Fed remains convinced (and they would know) that there is no bubble in asset markets - in the face of record issuance of covenant-lite loans, record high stock prices in the face of declining fundamentals, and record low spreads in credit markets as leverage rises - as we noted yesterday, investors "are stretching to find reasons not to cut" their allocations. The bursting of the bubble was dismissed by many late last year as "bubble" talk reached highs - providing psychological non-confirmation that a market drop is unlikely when bubble talk is so high. It seems, in the last few weeks that has shifted as bubble chatter has dropped rather notably.
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Does that free up investor psychology to sell? Being "greedy when others are fearful" has an equal and opposite trading meme - cover when no one is worried.
Chart: Bloomberg