According to BlockBeats, the U.S. stock market has experienced significant growth this year, driven by advancements in artificial intelligence (AI) technology and the Federal Reserve's monetary easing policies. Major companies like Apple, Nvidia, and Tesla have seen their stock prices rise, and the S&P 500 index reached its 48th record high of the year on October 18, nearing the 6,000-point mark with a year-to-date increase of 22.6%.
However, despite the bullish market, the Buffett Indicator recently hit 200% for the first time in history, surpassing levels seen during the dot-com bubble and the global financial crisis. The Buffett Indicator, introduced by Warren Buffett in 2001, measures the ratio of the total market capitalization of U.S. stocks to the country's GDP. A high ratio suggests that the market is overvalued, while a low ratio indicates undervaluation.
In light of this, Citibank analysts have noted that the exposure level of the S&P 500 has reached its highest point since mid-2023, signaling potential market instability. They observed that similar exposure levels in mid-2023 led to a decline of over 10% in the following three months. While they are not advising investors to reduce their positions, they caution that the risk associated with holding positions is undoubtedly increasing.
Despite these warnings, Citibank's strategy team, led by Chris Montagu, also highlighted that the prospect of a soft landing for the U.S. economy supports bullish momentum for the stock market and the S&P 500 index. Although the current exposure level is high, it is not as extreme as it was in 2023, meaning that short sellers also face significant risks if they increase their positions in the short term.
Additionally, gold, traditionally seen as a hedge against political and economic uncertainty, has risen by 32.5% this year, reaching a record high of $2,758 per ounce on October 23. It slightly retreated to $2,733 per ounce on October 24. RJO Futures strategist Bob Haberkorn noted that while some profit-taking might be occurring, the ongoing risk-averse sentiment could push gold prices higher, potentially reaching $2,800 by the weekend.
