January 14, 2014

Almost everyone is Bullish right now

Virtually all strategists are now self-confident bulls, as gloom-and-doom forecasts have all but disappeared. After more than a year with no reactions of 10% or more, any future setbacks are being viewed by the consensus as "bumps in the road" and as opportunities to buy because (after the correction(s)) we will be "up up and away."

After missing the 25% rise in P/E ratios in 2013, the consensus also assumes that valuations will expand again in 2014. (Note: The average P/E ratio has increased by about 2% per year over the last 25 years.)