While it is hardly news that the market is continues to melt up daily, in what has been dubbed a "blof-off top", a parabolic surge, and even Morgan Stanley yesterday conceded that "We Have Entered The Late Cycle Euphoria Stage", what makes this time different is that on previous such occasions, there was always an imbalance between institutions and retail investors, with the former taking advantage of the euphoria to sell to the latter.
Not this time.
According to the latest Investors Intelligence survey, both pros and retail just can't get enough of this move as stock market optimism among professional investors just keeps on surging, and is now at the highest level in 31 years, since before the crash of 1987. In fact, according to widely followed survey, bullishness is now at 66.7%: that's the highest level since early April 1986.
While traditionally, this would be a warning sign that the rush into equities is getting overdone - after all, a year after the bulls had reached this level came the infamous Black Monday crash that sent the Dow Jones industrials down nearly 22 percent in a single day as CNBC notes - this time with central banks, pension and sovereign wealth funds all buying stocks -with leverage - it may indeed be different this time.
The Investors Intelligence survey also showed that skepticism is nearly gone as the S&P 500 has posted a 3.85 percent gain in 2018. Bearishness fell over the past week to 12.7%, also the lowest reading since April 1986. The level was at 15.2 percent just two weeks ago and was above 20 percent the week of Sept. 12.
"Sentiment readings have roughly followed their 1986/87 pattern. Then the bulls peaked with initial market highs early that year and they returned to above 60% levels months later after more index records," John Gray, editor of the Investors Intelligence weekly report, said in the latest issue Wednesday.
"In 1987 stocks crashed a few months after that. A repeat of that scenario suggests potential danger, especially as the market moves become parabolic," he added. "Those recently holding cash appear to be chasing a rallying market, adding fuel to the fire."
The II survey is not alone: other gauges also show stock market fever is reaching levels not seen in years. As we showed yesterday, according to the January Bank of America Merrill Lynch Fund Managers Survey, fund cash levels are at a five-year low...
... allocations to stocks at a two-year high...
... and the overweight ratio of stocks to government bonds at its highest since August 2014.
Meanwhile, in just over two weeks of trading, investors already have poured $14.8 billion into stock-based exchange-traded funds, another indicator of money surging in.
"The strengthening economy and increasing earnings projections makes this outlook hard to defend." Gray wrote. "Low bearish readings are negative for contrarians as the markets are said to 'climb a wall of worry.'"
The newsletter each week features a sample of bullish and bearish quotes from the authors it polls. This week found very little in the camp of those looking for a downturn, save for William John Kuhn, whose "The Risk Factor Method of Investing" compared the market to a runaway train.
For now there is no stopping the train, however, and retail investors seem to agree: according to a just released study by retail brokerage E*trade, nearly eight out of 10 investors believe the market will rise this quarter, up 11 percentage points from the fourth quarter of 2017.
The survey also showed, that 68% of polled investors are bullish, in line with the Investor Intelligence survey, 5% points higher than in 4Q 2017. Only 9% of investors see the market going down in 1Q, 14% see it unchanged.
And while bitcoin has demonstrated vividly over the past two days what happens when everyone is on the same side of the boat, it remains to be seen what catalyst can reverse, or even slowdown, the relentless equity juggernaut that barely remembers what a down day represents.