"Everywhere Euphoria": Bank Of America Warns Of "Echoes Of 2000"

With the S&P hitting daily record highs, the financial media has been flooded with analogies to January 2018 which was the last time that the market saw a similar "blow-off top" meltup, one which ended in tears in the first week of February when the negative gamma complex imploded as a result of massive vol selling and inverse VIX ETFs blew up overnight, sending the S&P lower by 10% in days. Perversely, that VIXtermination event removed what was traditionally a handbrake to market meltups and without a market manifestation of the retail "short vol" trade, it is quite possible that the current meltup will continue indefinitely.

Which is why the correct comp to the current market move may be not to Jan 2018, but to January 2000.

At least that's the assessment of BofA's chief investment strategist, Michael Hartnett, who writes in his weekly Flow Show that "Q1'2020 = Q1'2000" and notes that inflows to bond funds are annualizing at a remarkable $1tn in the past 2 weeks...

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... resulting in echoes of 2000, with investor euphoria sending bond yields lower despite stronger global macro, such as a rebound in Asian export cycle, and a 30%+ surge in US mortgage applications.

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But the clearest indication that this is the second coming of the tech bubble is the rampage of "trillion dollar babies", the direct result of $12 trillion of QE "since Lehman" - in this case, Hartnett's term, not ours:

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... in addition to $1 trillion in stock buybacks past 5 years by top 20 US companies (amounting to $381,000 per employee), and resulting in APPL, MSFT, GOOG all worth >$1tn; meanwhile, the S&P 500 is just 5% away from becoming largest bull market of all time (3498) even as the Fed is now stuck and can never again allow stocks to drop as US financial assets (i.e., Wall Street) is a record 5.5x size of GDP (Main St). In short, the entire market is now "too big to fail."

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