The current bull market, which started in early 2009, has been called “the most hated bull market in history.” It seems investors have been waiting in vain for that other shoe to drop only to see the market march higher with nary a correction.
Stocks climb a proverbial wall of worry, and negative sentiment among rank-and-file investors is actually a contrarian bullish sign. It is when sentiment gets one-sidedly bullish and investors throw caution to the wind that you know a major top is near.
But with the S&P 500 now sitting near all-time highs… and tripling in value from its 2009 crisis lows… is it really fair to call this rally “hated”?
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Let’s take a look at investor trading on margin. When investors are feeling bullish, they are a lot more likely to trade aggressively… and to borrow money to do it.
As you can see in the chart, investor margin debt as a percentage of market cap does indeed tend to surge leading into a major market top and tends to fall dramatically during a market decline. We saw investor margin debt jump from less than 1% of market cap to nearly 2% during the great 1990s tech bubble. And it had another major spike during the bull market of the mid 2000s.
Today, we certainly don’t see a lot of investor enthusiasm for margin trading, and margin debt is actually trending lower. We’re still at levels that are high by historical standards, but much of this can be explained by two factors:
- Ease of margin trading with discount online brokers
- Falling interest rates over the past 30 years…and particularly over the past 6 years.
Remember, the Fed has kept short-term lending rates at close to zero for six years now, so it’s natural that investors will borrow more aggressively on margin. “Free money” makes carry trades that wouldn’t be profitable under “normal” conditions worth doing. Seen in this context, today’s margin debt levels are far less impressive and certainly far less indicative of investor enthusiasm.
So, at least by this metric, our bull market today really is more unloved than hated, at least by the standards of recent major tops.
-
Social Security Chief: DOGE Cannot Make Changes to Benefit PaymentsDOGE has limited "read only" access to data and will not disrupt or delay the disbursement of payments to beneficiaries, SSA Acting Commissioner Dudek said.
-
Stock Market Today: Dow Dives 748 Points as UnitedHealth Sells OffA services-sector contraction and a worse-than-anticipated consumer sentiment reading sent bulls scrambling Friday.
-
Five Wins for Federal Employees in the Social Security Fairness ActMore money means more opportunities and financial stability for current retirees and future retirees.
-
How Do You Know Your Insurer Can Afford to Pay Your Claims?Here's how to find out where your insurance company stands financially and whether it has a good track record with customers.
-
Stressed About Doing Your Taxes? Use These Easy Tips to CopeIf the thought of filing your taxes puts you on edge, you're not alone — nearly 65% of Americans say they're stressed during tax season. Here's how to cope.
-
Three Ways to Get Your Finances in Better ShapeWant fitter finances this year and beyond? Start by making full use of all your workplace benefits — from 401(k)s to budgeting apps and wellness programs.
-
Rethinking Income When You Retire: No Paycheck, No ProblemWhen you retire, you'll need to adjust to the reality of depending on assets instead of a regular paycheck. For that, you'll need a new financial strategy.
-
How to Support Your Parents Without Derailing Your FinancesPutting your aging parents' financial house in order can give you a clearer picture of where they need support and how to balance that with your own plans.
-
Why 'Standard' Digital Background Checks Can Be So UnreliableMissing online data, as well as stringent federal and state privacy rules, make it difficult to discover a prospective employee's or tenant's criminal past.
-
Are You a High-Income Earner? Three Unexpected Reasons to Save More Than You Think You ShouldHigh-income earners sometimes put off saving because they think they have plenty of time and money to do it later. That's not always the case, though.
