Is the bull market bubbly or maturing?

Market bulls are firmly in command. New data from research and consulting company, ETFGI, shows that exchanged traded fund (ETF) assets worldwide reached a record US$12.25 trillion last month. Global ETF assets saw US$116.3 billion in net inflows in February, the 57th straight month of net inflows.

Equities are the big winners. Equity ETFs reported net inflows of $80.4 billion during February, bring year-to-date net inflows to US$141.4 billion, close to 7x the amount recorded from the same period last year.

And where’s the money flowing into equities? It’s primarily the US market, and the technology sector. For instance, the Vanguard Information Technology ETF (NYSE: VGT) increased its assets by almost 10% in February alone – quite something for a fund with almost US$70 billion in assets.

It’s not only equities benefiting. Bitcoin is getting plenty of investor attention too. The iShares Bitcoin Trust (NASDAQ: IBIT) now has US$10 billion in assets under management, up from close to US$5 billion in January.

The bullish sentiment is a boon for the ETF industry. There are now more than 12,000 ETF products worldwide, up from 5,000 just five years ago. As Grant’s Interest Rate Observer notes, 3,000 global ETF products have launched over the past 15 months, nearly matching the 3,700 companies listed on US exchanges.

Record equity inflows

The ETF data mirrors broader market money flows. EPFR Global data reveals that investors tipped US$56 billion into US equities in one week through mid-March, besting the previous record set in March 2021. Of those weekly inflows, US$22 billion went to technology stocks, or 39% of the total.

Fund manager sentiment at two-year highs

The positive market sentiment is echoed by fund managers. According to Bank of America’s latest survey of global fund managers, sentiment is the most bullish since the heady days of November 2021.

Meanwhile, US stock allocations are also the highest since November 2021.

US tech allocations are the highest since August 2020.

And fund managers have cut their cash levels to 4.2%. Bank of America says large cuts to cash allocations are typically positive on a three-month view, though if they dip to 4% or below, then it’s a ‘sell signal’.

4x leveraged stock ETNs flying

The optimism has worked wonders for the MAX S&P 500 4x Leveraged Exchanged Note (NYSE:XXXX), launched by Bank of Montreal in December last year. The exchange-traded product allows massively leveraged bets on the S&P 500. The ETN is up a cool 31% this year, bringing its market capitalization to US$106 million.

That the leveraged ETN was allowed to launch raised eyebrows initially, as it came after two 4x leveraged products proposed by ForceShares were blocked by the Securities and Exchange Commission back in 2017.

The IPO market rising from the dead

Meantime, the IPO market is getting a jump-start after being moribund for the best part of 18 months. Reddit (NYSE: RDDT) went public on March 21, the first social media company to IPO since 2019. Its IPO price of $34 valued the company at US$6.5 billion, 35% below its highest private market valuation of US$10 billion in 2021.

The stock jumped 48% on debut, is now up 91% since listing. The market cap of US10.35 billion eclipses that of the 2021 private market valuation.

Not bad for a company that’s never made a profit since being founded 20 years ago. Last year, it reported US$801 million in revenue but had a net loss of US$91 million. At least it was better than the year before, where the net loss came in at US$159 million.

Reddit now sports quite the valuation, trading at a 12.9x price/sales ratio. That compares to the likes of Meta (NASDAQ: META) at 9.8x and Pinterest (NYSE: PINS) at 8.9x. To put it into context, Reddit has 73 million daily users, compared to Facebook’s 2 billion.

And just this week, Donald Trump’s company, Trump Media & Technology Group (NASDAQ: TMPTG) debuted on the Nasdaq, and rose intra-day 60% on day one before finishing up 16%. It came more than two years after its merger with a blank-cheque firm was announced. Trump’s stake in the company is valued at US$5.4 billion, meaning the Republican Presidential nominee may not go bankrupt after all.

Unsurprisingly, other companies are expected to line-up to IPO. Investors expect US listings from payments provider, Stripe, last valued at US$50 billion, and ‘buy now payment later’ operator Klarna, sometime in 2024.

Insiders selling

While investor go all-in on markets, corporate insiders appear to be heading for the exits. According to Verity LLC, the ratio of corporate insider selling to insider buying is at the highest level since the first quarter of 2021.

Some of the biggest sales have come from tech executives. Amazon founder, Jeff Bezos, sold shares worth US$8.5 billion in February. That’s noteworthy as Bezos has timed share sales well previously, especially in 2020-2021.

Meta CEO, Mark Zuckerberg, sold US$135 million worth of shares in early February, while Palantir co-founder, Peter Thiel, offloaded US$175 million of stock this month.

Is the bull market bubbly or maturing?

Investors love to see things in black and white, yet most are grey. One person’s market bubble can be another’s bull market.

While it’s beginning to feel like 2021, we’re probably not there yet. There are plenty of signs of froth in certain areas of markets - namely in US stocks, technology, Bitcoin, AI – yet that has filtered through to other areas. Whether it will or not remains to be seen.