A Warning Sign ?

WSJ

WSJ’s Daily Shot: U. S. Households’ Exposure to Stocks Highest Since the Dot-Com Bubble

Since we know that retail investors tend to buy high and sell low and that after the market hits new highs they may be prone to tell whatever profits they have on a market decline, in turn triggering more selling this information should raise a bit of caution

Companies themselves that should the best handle of what their company is worth have been cutting back on stock buybacks indicating they may see their own stock as expensive.

Certainly being long stocks has seemed to be a one way bet. On the positive side corporate profits are strong particularly due to foreign revenues benefitting from a weaker dollar/stonger foreign currencies,

Looking at this chart of the S+P 500 its not hard to see what has driven the record high ownership of stocks

Valuations are high with the S+P 500 p/e at 24.6 well above the long term mean of  15.66. The tech sector has been leading the market and carries high valuations but way below those found during the tech bubble.

There is much to debate

The bullish case for stocks is made by Prof Jeremy Siegel of the Wharton School although I would add the caveat that he is quite as bit of a permabull (but too his credit he turned beaarish near the end of the tech bubble.. It also may be misleading depending on how one defines tech stock. Many use the Nasdaq as a proxy but it may be an imperfect one. But among the top holdings in the Nasdaq are Facebook 6%  Amazon  7.18%and Google (counting Google and Alphabet togeher) 9%, Valuation  at a p/e of 26 is nowhere near the dot.com high of 175

The technology ETF  has among its top 5 holdings Facebook at 7.6% and google/alpphabet 10%

It is an open question how much these 3 stocks (partciularly amazon) belong in the same category as Microsoft and Apple (#1 and 2 in the tech index) or chip, software or hardware makers such as Cisco, Inteland Intel and Adobe which each have a 3% weighting

From CNBC

Soaring tech stocks are not in a 1990s-type dotcom bubble, says longtime bull Jeremy Siegel

• Momentum players are not driving the action, as they did in the past, the Wharton professor says.
• The stock market is "very fairly valued" at current levels, Siegel says.
• The Dow, S&P 500 and Nasdaq were riding six-session winning streaks heading into Friday and the long Memorial Day weekend.