Juggling Dynamite

Madness and mayhem are the order of the day, while consumer and business sentiment are dour, and for-sale signs are popping up like measles.

Meanwhile, equity markets are priced for nirvana, and participants are the most long of all time. Households and nonprofit organizations entered 2026 with a record near half of their financial assets held in equities—the most ever (shown below since 1952).

Professional fund managers are positioned with the highest equity exposure and growth expectations since the market top in 2021 (shown below since 2001, courtesy of The Daily Shot).

At the same time, global managers are holding the least downside protection hedges since the 2021 market top (below since 2008).

Fund manager cash levels at 3.2% are the lowest on record since at least 1999 (shown below). The bear market is in dry powder; cash on hand has never been so low.

As real estate investors have been discovering, when sellers wish/need to sell en masse at high prices, there are few willing and able buyers to be found. Spring listings are looking to start early this year. See, BMO economist says real estate has entered a ‘slow grind’ toward affordability:

Andre Kutyan, broker with Harvey Kalles Real Estate, began photographing the pools and landscaping of some houses last fall in preparation for hitting the market early in the New Year, when they may still be buried under a layer of snow.

He plans to start launching new listings in mid-January.

“I’m curious to see how early the spring market will start this year,” he says.

Agents are also watching to see how much supply arrives on the resale market.

Many are hearing from baby boomers who have been holding onto their large homes with hopes of a recovery in prices, but have now decided to move ahead with a sale.

Some homeowners with high-priced properties are also choosing to downsize their investment as economic uncertainty continues.

“You can only wait so long,” he [BMO economist, Robert Kavcic] says of the sellers. “There’s a cost to waiting, too.”

The attitude among buyers at the moment appears to be a reverse FOMO, or “fear of missing out,” he says.

This is all classic. Humans are wired to self-sabotage in financial matters, and it takes discipline and forethought to resist groupthink. Opportunity arrives for patient buyers holding cash who’ve prepared their buy targets in advance.

The investor emotional cycle has not been repealed, and we now have emojis to help express it.

For more than four decades, Jeremy Grantham has been one of the most contrarian voices in global investing. The co-founder of Boston-based asset manager GMO, he built his reputation warning about bubbles before they burst, from Japanese equities in the late 1980s to US tech stocks in 2000 and housing in the run-up to the global financial crisis. He joins this week’s Merryn Talks Money podcast with host Merryn Somerset Webb to discuss why he believes there’s an artificial intelligence bubble and what happens if it bursts, his approach as a value investor and the lessons in his new book, “The Making of a Permabear: The Perils of Long-Term Investing in a Short-Term World. Here is a direct video link.

Extremely interesting historical perspective in this discussion; worth a listen.

David McWilliams (The History of Money: A Story of Humanity) is a journalist, writer, and economist. David joins the Armchair Expert to discuss having an unusually calm Irish family upbringing, being practically prescribed to study economics, and the impact that his father being screwed by the system had on him as a kid. David and Dax talk about his early, life-changing realization that no one actually has control over the economy, why economics should be seen as a form of communication about the world, and how the human advent of fire helps us to understand money. David explains the idea that the technology of trading money was an alternative to war, how money amplifies the trust necessary to function in complex societies, and why the reason that money is weird is because we are weird. Here is a direct video link.