The longest bull market in history keeps rolling along. And the recipients of this bull market’s run are losing money hand over fist. There are more than 40% of listed companies in the U.S. that lose money – the highest level since the late 1990’s outside of post-recession periods. 42% of those money losing companies are health care and 17% are technology companies. Approximately less than a quarter of the companies that went public in 2019 will have positive net income – the lowest level since the tech bubble. Like the tech bubble in 1999, investors are pouring money into tech and now health care. Last year investors put $11 billion into digital health companies. Venture capital funding has reached the dot-com era level. According to research firm Preqin, private equity firms have amassed approximately $1.5 trillion in unspent capital, the highest total on record.

This isn’t the only characteristic that is like the tech bubble. The Fed’s open checkbook is making many observers worried. There is extraordinary liquidity being provided by the world’s central banks, which is flowing to the most liquid and largest names in the S&P 500. This reminds us of 1999, when the Fed expanded the balance sheet at the end of the year and early in 2000 as a precaution against a Y2K disruption. The Fed supplied about $120 billion to the market through repos to prevent a disruption then. This was about the same amount pumped in during the financial crisis of 2008 and more than it provided in reaction to the September 11 attacks. Since October of last year, the Fed has supplied approximately $400 billion in four months - a $1.2 trillion annual rate!!

This liquidity is feeding into large, liquid names – the bigger the better. As seen by the Fear & Greed Index below, the greed reading is at 89 down from 93 a week ago. We believe this is FOMO (Fear Of Missing Out) at its best.

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