QQEW - Relentless Price-Insensitive Buying

• We have focused on the monetary tsunami set in motion by central banks, but there is another force contributing to the record-high valuations in the US stock market.
• That force is the shift towards passive and ETF-focused investing that began more than two decades ago and has come to dominate flows within the stock market.
• Be wary of confident claims to the effect that today's record-high valuations imply that a major top is close in terms of time or price. The reality is that valuations could go much higher.
• Also be wary of bullish complacency, because at some point the flows will reverse.
• The risk that flows will reverse with little warning is why we are about 35% in cash despite our expectation that the equity bull market will continue for at least a few more months.

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