For the last 12 months, the broader market is up more than +30%.
But this has been truly The Rally That Wall Street hates.
Focused mostly on what can go wrong - and not on the huge relative attraction of stocks relative to bonds - strategists have consistently called for caution over the past year, and have thus missed one of the strongest 12 month rallies in the past decade.
And Wall Street still remains bearish, as Merrill Lynch's global strategist Savita Subramanian wrote yesterday:
Equity sentiment remains unchanged near all-time lows
Although we are probably due for some sort of correction, I continue to believe that we could rally into the end of the year.
To be sure, recent economic data has not been especially encouraging, and comments coming from corporate America have been cautious. But with so much money on the sidelines earnings essentially nothing, investors are being forced to gradually deploy at least a portion of their reserves into riskier assets.
A good example of this can be found in the private equity community.
Writing in this morning's New York Times, columnist Andrew Ross Sorkin observes that many private equity funds are under pressure to invest some of their cash reserves or face the unappealing prospect of being forced to return funds to their investors and lose out on their lucrative fees.
Sorkin notes that private equity funds currently control nearly $1 trillion. Nearly $200 billion from funds raised in 2007 and 2008 have be spent in the next 12 months, or else returned to investors.
Here's what he writes:
If the private equity firms don’t spend the money that they have already raised, it is unlikely they will be able to raise even more in coming years. And increasingly, the private equity firms have become dependent on the management fees not just to keep the lights on but to expand their businesses into other areas, in part to diversify, which has been part of the pitch to public investors. The biggest firms have become asset gatherers.
“In a nutshell, 95 percent of funds would be affected and see a big drop in fee income based on not investing all of the committed capital,” according to Tim Friedman, director of North America for Preqin, which tracks private equity fund-raising and deals. He said that he did not expect firms to do deals simply “for the sake of it,” but he also cautioned that the firms were “under a lot of pressure.”