Another week, another rally? The market began the current trading week on a high note once again, and it seems as if this bull just can't be stopped. The S&P 500 has moved higher in 13 out of the last 15 weeks, and the current week looks like it will extend that streak. Yet with that index now firmly ensconced above the 1,400 mark, the bull and bear cases are beginning to sharpen.
The bullish case
On the bullish side, money is pouring into the market at a fevered clip as formerly bearish hedge funds shift their bias to bullishness. Individual investors are playing their part as well: The weekly sentiment snapshot conducted by the American Association of Individual Investors (AAII) shows bullish investors holding a 13 percentage point lead over bearish investors.
To be sure, stock prices are simply a function of supply and demand, and demand is quite strong right now.
The bearish case
The bearish side also has some merit. Economists express concern that the recent run of positive economic data may have run its course and fear the U.S. economy will cool in coming months. This is precisely the scenario that played out in 2011, as a strong start to the year met with a cooling off period in the spring that led to a market rout in the summer.
Technical analysts also talk of an over-bought market right now, and a number of measures suggest we're due for a pullback.
For now, investor enthusiasm is the overarching theme, though who knows how long that will last? What is known: a certain group of stocks should benefit from a rising market, while also offering much more robust downside protection.
I'm talking about low-beta stocks. Beta measures how a stock moves in relation to the broader market, and those with a beta of less than 1.0 means that they are fairly decoupled from the broader market. (My colleague Tim Begany recently touched on this theme.