"Cash on the Sidelines" Is Now Roughly the Size of Germany's GDP
by Phoenix Capita…Tue, 12/10/2019
In the last few articles I’ve argued that stocks are in the last bull market of our lifetimes.
Forget opinions, take a look at the 100-year chart on the S&P 500 and you’ll see what I’m saying. (nice, informative chart shows in the link)
Many pundits and analysts claim that stocks entered a bull market in 2009. However, when you look at the big picture, it is clear that stocks were in a bear market, or a prolonged period in which they went nowhere from 1997 until mid-2013.
That means we’re six years into this bull market (2019-2013=6).
This raises the question… what will be the driving force to push stocks to new highs?
The answer is “cash on the sidelines.”
The fact is that this is the single most hated bull market ever.
During the last three years, investors have pulled $1 trillion out of the stock market and moved it into cash. Yes, we’re taking TRILLION with a “T.”
Things get even crazier when you zoom out to the big picture. Collectively, stock-based mutual funds and exchange-traded funds have seen OUTFLOWS in seven of the last 11 years.
Put another way, at a time when stocks have been rising almost non-stop (2008-2019) investors have PULLED MONEY OUT OF THE MARKET nearly two thirds of the time.
As a result of this, Currently investors are sitting on $3.4 trillion in cash… an amount of money almost equal to the GDP of Germany.
Again, this is literally the most hated bull market in history. And it tells us that we’re nowhere near a market top. Market tops occur during market manias in which investors are “all in” on stocks .
That is NOT the case now. It will be however, when the S&P 500 hits 5,000 in the coming months. The long-term bull market channel is open to this happening within the next 18 months.