A friend forwarded me an email yesterday from K2 Advisors.
I don’t know anything about K2 Advisors, except that it is based in Stamford, Connecticut and its emails are packed full of interesting insights. For example, K2 notes that:
- Bond yield spreads have narrowed to their lowest levels since 2007. [i.e., the buyers of corporate bonds are confident. They are demanding very little incremental yield over Treasury bonds].
- An ISI poll shows that 93% of institutional investors think we are in a bull market.
- According to Investors Intelligence, only 15.7% of investors are bearish – the lowest reading in 20 years.
In other words, investors are extremely confident and complacent. From a contrarian standpoint, extremes of complacency tend to precede significant market corrections.