Speaking at a conference in London, Goldman MD Christian Mueller-Glissmann warned investors, “valuations are at very high levels. And that concerns us when it comes to making progress in stocks, unless you maintain a very high level of optimism.” The firm’s aggregate risk appetite index reached record highs in December – the same peak reached in 1999/2000 and 2007… and we know what happened next.
“This is a chart which a lot of people have in the back of their mind right now. It’s our risk appetite indicator. That essentially shows you across asset classes what the risk appetite is. And it has equity risk premium in there it, it has VIX, it has everything that reflects how bullish markets are and it’s real time.“
Mueller-Glissman goes on…
“And guess what, in the middle of December, that indicator had the highest level in the history of the indicator. We are not at the beginning of this optimism trade, we’re really in the middle of that optimism trade.“
Roughly translated, like small business optimism, this is as good as it gets for markets.
Here’s two examples of that ‘risk appetite’…