Emerging cracks in the perfect bull market

On the surface, markets appear very strong and healthy. Many broad indices are making new highs, expectations are for another quarter of strong earnings, and the tactical backdrop in terms of flow remains very supportive. More importantly, many of the "old" bear arguments around valuation, duration of the bull market and extreme sentiment & positioning have not worked at all for the past few months and feel pre-historically irrelevant (even though of course they should not as they one day will matter). However, when we peer a bit closer there are some early signs that would signal caution. This might not be the optimal time to increase risk but rather trim it.

1.      Hedge funds not chasing key leaders