• The bull market could possibly be in its final days, in line with Calamos Investments’ Michael Grant.

• The CIO said the market has suffered from “invincibility syndrome.”

• Grant said stocks could soon enter a period of weak returns, possibly for “a few years.”

The bull market in stocks looks prefer it’s near the highest, in line with an investment chief.

Michael Grant, the co-CIO of Calamos Investments, thinks large-cap stocks could possibly be on the right track for the most effective years during the last century, before the market suggestions right into a period defined by subpar returns.

That is because stocks are flashing signs of “invincibility syndrome,” with investors falsely believing that nothing can stop further gains, he said in a note this week.

“Essentially the most significant feature of this investment yr is the perception that US equities are virtually invincible. This ‘Invincibility Syndrome’ historically signals a crescendo when markets are within the strategy of summiting a significant peak,” Grant wrote.

“In our view, the paradox of this rewarding yr is its underlying warning of low future returns for 2025 and beyond,” he later added.

The precarious state of the market may be seen in a slew of knowledge points that measure valuation, sentiment, and positioning, he noted.

A handful of valuation measures suggest stocks are at historically expensive levels, Grant said. As an illustration, the median price-to-earnings ratio of the S&P 500 is 28, the most costly stocks have been relative to earnings since across the dot-com bubble.

Meanwhile, the usual Shiller cyclically adjusted price-to-earnings ratio — which smooths out outlier P/E data — has climbed past 35, the very best level on record.

Sentiment and position indicators are also flashing signs investors are overexcited in regards to the stock market, Grant said.

Households seem like probably the most bullish on stocks for the reason that dot-com era. The proportion of consumers who expect stock gains over the following yr has climbed to its highest levels recorded since 1987, in line with the three-month moving average of responses to the Conference Board’s monthly survey.

Households even have a number of money allocated to investments. US households held a record $42.43 trillion in corporate equities and mutual fund shares over the second quarter, Federal Reserve data shows.

Meanwhile, the amount of money held by non-bank investors as a percentage of equity mutual funds has dropped to just about 30%, around historic lows. That means there’s little “cushion” within the event the stock market declines or experiences a shock, Grant said.

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“What’s striking today is how positioning measures corroborate the diagnosis of prolonged confidence and valuation for the leading categories of US equities. What stays to drive a market higher if everyone seems to be already bullish?” Grant said.

Investors have felt pretty optimistic about stocks to date this yr, thanks largely because of optimism on the US economy and expected rate cuts. But when the economy is headed for a soft landing or no landing in any respect, that means rates of interest won’t move significantly lower, Grant noted.

“Put simply, the decline of long-term risk-free yields appears complete, unless the soft-landing assumption is badly flawed. The landscape taking shape represents the ultimate stages of the bull market and a prelude to a far more disturbed period ahead, perhaps for a few years,” he said.

Grant added that the push toward 6,000 for the S&P 500 suggests that 2024 will mark the strongest yr for large-cap stocks of the century to date, but that doesn’t suggest the longer term can be as brilliant.

“And yet, this thought pales compared with the growing evidence that we’re witnessing a crescendo— a summit for equities that might prove durable.”

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