"It's interesting to see the reactions among clients and other investors to the melt-up story. It's been a mixed bag here in the United States, with more bearishly-inclined investors incredulous that it is even a possibility. I was in London this past May and when I brought up the subject at a small investor dinner, the debate became particularly heated between the melt-up believers and non-believers. More interesting was my experience in China last week, where there was much more enthusiasm about the possibility of a melt-up (highlighting the more trading-orientation of investors there in US stocks).
Two of my long-time friends in this business- famed economist Ed Yardeni and famed strategist Laszlo Birinyi (with whom I shared the stage on Wall $treet Week With Louis Rukeyser)—have been warning of the risk of a melt-up. Like me, they remain bullish, but are keeping an eye on sentiment risks.
Sentiment does look a bit stretched in the short-term, with both the Ned Davis Crowd Sentiment Poll and SentimenTrader's Smart Money/Dumb Money Confidence Poll showing elevated (extreme) levels of optimism. The former should be very familiar to readers as it's my go-to sentiment indicator because it's an amalgamation of seven distinct indicators. The latter is one I haven't shown in some time, but it is flashing a bit of a warning presently".
These both suggest there is a growing near-term risk of a pullback.
Liz Ann Sonders,Schwab.
