Screamed my Bloomberg newsfeed in red a few minutes ago
1) Isn’t the war still going on?
2) Don’t most people think Europe is a “basket case”?
3) And didn’t the September 2022 Bank of America survey find that, “ Fund managers were the most UNDERWEIGHT on European equities EVER”, to quote the Forbes article on the report?
So how on earth is the index hitting new highs?
1) The war is old news and probably nearing the end
2) It isn’t a basket case and never was – it’s just the perception that US companies are better “managed”. They are definitely “run faster”, but that’s how you get three “fast bank runs” in a week ..
3) When “everyone” is UNDERWEIGHT a region or sector, it often means the SELLING is behind us
Meaning the SUPPLY of shares has dried up (Economics 101)
Now all you need is a slight improvement of fundamentals (eg. EU not running out of energy)
And suddenly the DEMAND for shares overwhelms the limited SUPPLY of shares and
share prices rise
Ok, but what happens when everyone is OVERWEIGHT a region or sector or strategy, or style?
Oh, you mean like now with everyone:
OVERWEIGHT the US
OVERWEIGHT Technology and
Well then it could mean that the BUYING is behind us
So THEN all you just need is a slight deterioration of fundamentals
And suddenly the SUPPLY of shares overwhelms the DEMAND
And US, Growth, Quality, Technology, and Passive
become the “basket case”
But are most people expecting that?
But remember “most people” don’t beat the market…