All-Time Highs, But Is This A Bull Market?

Investors are preparing for more market volatility in the coming weeks even if equities hoover near fresh highs after seven months of straight gains.

"It's been a year of positive market returns, but it's a bull market which has pretty defensive undertones" Saira Malik, head of global equities at money manager Nuveen Investments

The market rally has been driven by popular destinations for nervous investors as utilities gained more than 10% during the last quarter while real estate and healthcare have also had a smooth ride. This is further exemplified by the gap in price between the front month CBOE Volatility Index futures contract and the VIX index itself is higher than it has been about 85% of the time since 2016. In short, this means that investors expect more volatile times ahead.

Big Picture

In a post-pandemic world, investors are caught between talks of irrational exuberance and the "new normal". With low interest rates and news (Delta variant, slow job growth) that keep the Fed dovish, investors have nowhere else to hide than in (over-valued) equities.

"At the same time, many have grown antsy in a market that has gone 292 calendar days without a decline of 5% or more, nearly three times the average since World War II, according to data from CFRA's Sam Stovall. Rising valuations, ebbing economic growth and signs of speculative excess have only added to their concerns." by Saqib Ahmed for Reuters


  • The pandemic saw the rise of many technology players who had their moment in the sun as locked-at-home consumers spent more time online
  • Many of these tech-leaders saw their valuation rise substantially in a short time span, before giving back some of these gains
  • The current recovery has been lead by defensive and cashflow rich businesses as investors were trying to hedge against inflation and sought to take advantage of the "return to normalcy"
  • Investors expected the pandemic to be over soon. Yet, variants, a difficult labour market and uneven vaccination rates are suggesting that the pandemic isn't over yet
  • Central banks are cautious with the messages they send out. Sounding slightly too hawkish could shatter business confidence and break the post-COVID recovery cycle
  • In economic terms, this means that future job reports might not be as good as expected and investors can expect the Fed to be patient
  • With stocks near all time-highs and a more difficult recovery ahead, we expect a near-term pullback into richly valued assets. We therefore keep a large portion of our portfolio in cash


Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.


Photo by Sahand Hoseini on Unsplash.