Is the Investment Community is Getting Overly Bullish?

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Is the Investment Community is Getting Overly Bullish?

Is the Investment Community is Getting Overly Bullish?



The risk-on rally for equities continues after another show of strength from US stocks which saw the Dow press on to a fresh 2 month high.

Chinese exports surprised investors yesterday by rising almost triple the estimates and signalling that global markets could be on the mend.

This encouraged the US investing community to move back into stocks, pushing the Dow Jones 80 points higher to 13,471.

This in turn has allowed European stock markets to commence the session, if not much higher, at least flat and not far from their recent highs.

The start to the year has been impressively bullish and this has caught most people off guard.

However, there's a danger now that the investment community is getting overly bullish.

Some analysts have been upping their year end targets for the FTSE 100 index and putting them around the 6700/6800 level.

This would be another double digit percentage gain for equities on top of the near 3 year rally we've already seen, the anniversary of which is in March.

The FTSE is showing signs of being overbought on some of the technical analysis signals and it's no wonder that Financial Spreads clients are so heavily short of the index.

The avoidance of the fiscal cliff, some good economic data, decent business surveys, good Eurozone peripheral bond auctions and the delay of the Basel deadlines have all meant that investors are happy to buy into equities.

However, there's every chance that this enthusiasm could lead to complacency. As the saying goes, 'when everyone's a bull, it's time to get out'.

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By Simon Denham, 11 January 2013


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