Leverage reflects the start of a bear not a bull

Analysts and economists are in unanimous agreement that March 2020 was the start of a new, long-term bull market. Optimistic sentiment is not consistent with the start of enduring bull markets. Bulls emerge from times of deep-seated pessimism, when few investors believe that stocks have the ability to rally for any sustained period.

The current environment is the polar opposite. This chart shows the Rydex Total Leveraged Bull/Bear ratio in 2020. On Tuesday, the ratio jumped to 41.5, which means Rydex mutual fund investors had 41.5 times as much money invested in leveraged bullish funds as in leveraged bearish funds. That’s a stunning 63% increase from the level that attended the S&P 500 high in February, which was a record!