The bull market will continue in 2021 with stock holdings still well below dangerous Global Financial Crisis levels, JPMorgan says
- There's more room to run in the current
bull marketbased on current investor stock holdings, according to a team of JPMorganstrategists led by Nikolaos Panigirtzoglou.
- At the moment, non-bank investors around the globe allocate 43.8% of their portfolios to equities, which is significantly lower than the post-financial crisis high of 47.6% which was seen in January 2018, JPMorgan said.
- This means stock can continue to grow higher, said the strategists.
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There's more room to run in the current bull market based on current investor stock holdings, according to a team of JPMorgan strategists led by Nikolaos Panigirtzoglou.
As equity indexes continue to blaze past new highs, investors may be cautious that the stock market is headed for an inevitable crash. Last week, legendary investor Jeremy Grantham renewed his warning to investors that the stock market is in a "fully-fledged epic bubble," driven by extreme overvaluations and "hysterically speculative investor behavior."
At the moment, non-bank investors around the globe allocate 43.8% of their portfolios to equities, which is higher than the average 42.3% allocation post-Global Financial Crisis, but significantly lower than the high of 47.6% which was seen in January 2018, JPMorgan said.
This means stocks can continue to go higher, said the strategists.
The 42.3% allocation, what JPMorgan considers "neutral equity allocation" was first breached in the middle of November. Stocks exceeded analyst expectations amid positive vaccine news and the conclusion of the US presidential election. At the same time, the government bond market faced a selloff, which pushed equity allocations further above neutral.
But because equity allocations are still well below the highest point, JPMorgan isn't worried that stocks are heating up too fast, too soon, and the bank sees further upside in the current bull market.
In order for the equity allocation to become a problem, the S&P 500 would have to gain 26.1%, the strategists said, a gain that is unlikely any time soon.
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