Stocks are in 'melt-up' mode and have further to run before hitting a top as strong participation drives latest rally, Leuthold CIO says

As a result, the stock market is in meltdown mode. A strengthening rally drives 24% year to-date gains in S&P 500.
Doug Ramsey, Leuthold Group's CIO, says that he doesn't expect a top-ranking executive to be made soon.

Ramsey stated to Bloomberg that the market "probably deserves the benefit of doubt due to its very strong internal momentum."

According to a Bloomberg interview, Doug Ramsey, chief investment officer at Leuthold Group, believes that the market is officially in melt-up mode due to a non-stop stock rally.

On Monday, the S&P 500 reached a new all-time high. It is now up 24% year to date and more than 100% since its pandemic low on March 23, 2020. A strong rebound in corporate earnings driven by a healthy customer has contributed to much of the strength.

Ramsey stated that the stock market gains are likely to continue because he doesn’t see a major top in the market anytime soon. He pointed out positive year-end seasonality as well as strong upside participation in the underlying stocks.

It would be rare for the market's to reach a major top. Ramsey stated that no matter how costly it is, or how the Fed might be shifting into a more accommodating mode, the history of the market shows that there is always some kind of narrowing before you reach a definitive peak.

This means that rather than mega-cap tech stocks such as Microsoft and Alphabet driving stock market averages higher, thousands of underlying shares are taking part in the recent rally. As evidenced by new highs on the Dow Jones Transportation Index and the NYSE advance decline line, which all help measure market breadth,

Ramsey is not shying away, due to the strong underlying market participation. He bought downside protection to protect himself against market volatility. Ramsey stated that the market is likely to get the benefit of doubt due to its strong internal momentum.

Ramsey says that the stock market will still have increased liquidity despite the Fed's planned tapering of its bond buying program. However, M2 money supply growth continues to drive Ramsey to believe that the Fed will not reduce its bond purchasing program. Ramsey said that we are still increasing the money supply to 13%. Ramsey stated that there is still liquidity available for financial assets.

Ramsey's market outlook could prove to be correct. Fundstrat's S&P 500 year-end price target of 4,800 should be within reach. Stock prices continue to be affected by risk-on sentiment.