The attitude of investors towards equities was buoyed last month by optimism that a China U.S. trade deal would get done, belief that the rate of change in global economic activity had bottomed and news that the Federal Reserve was growing its balance sheet again. Whether one calls it QE or not, in joining the Bank of Japan and the ECB, the graph on the below left shows the clear reversal from the balance sheet tightening of late last year. In fact the dashed line of forward estimates on the right side of the graph shows this latest central bank party is just getting started. As a result, after having sold equities to buy money market and bond funds during the past couple of years (please see the graph on the below right), FOMO (‘fear of missing out’) catalyzed investors to start chasing stocks. This renewed buying drove the strong November for stocks, one that included 11 fresh all-time highs for the S&P 500.
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