Chart 9: In May, the Nasdaq recorded its longest streak of monthly gains Chart 10: Tech valuations seem to be gaining momentum and are now at since 2009 (7M). However, compared to the only other instances of their highest levels since before the GFC but remain far from dotcom longer streaks (‘86, ‘95) the current bull run is still only half the size bubble peaks 160 Longest Lesleul Runs with Suara returns 60 150 5.3% a _ 14g Na 50 140 6.0% FY, i i 130 5.6% | 10.2% “ oH 40 4.9% A i 3.7% 120 0.5% H 5.0% 3.9% H rer 2% 30 110 9.2% | 6.7% gh 40, | i 1, 115.2% 100 Wr Bo. bate 20 = -Sep- |= 100 as of 30-Dec-94 | ae 90 100 as of 30-Sep-85 | as o' ec: L cme eGR 10 80 i H 0 SS8SBSSS SSS ESSSSESESES LECCE Ore OBrRryy~exewrerMmenrweonwn asoeat hes £b5eSoaus £9888R SBSSSSSSSSSSSESSSESRSES == SPX Tech P/E (price to consensus forward 12m earnings expectations) == May-86 Bull Run === Oct-95 Bull Run =————May-17 Bull Run == Current Source: BofA Merrill Lynch Global Research. Data from Sep-85 to 31-May-17 Source: BofA Merrill Lynch Global Research. Monthly data from Jan-86 to May-17. In addition to strong price performance, lofty valuations, and exuberant inflows, asset bubbles also tend to have two other hallmarks, best seen through the derivatives lens: (i) asset volatility rising alongside asset prices (Charts 11 & 12), and (ii) declining correlation as assets closest to the source of the bubble decouple from those farther removed (Chart 11). Chart 11: During the 2000s Tech Bubble, Tech vol rose with Tech stocks Chart 12: Historically, in major asset bubbles, realized volatility has and broader market correlations fell as Tech stocks decoupled from tended to rise meaningfully not only after the bubble deflates, but also other large caps — both classic signs of an asset bubble in the run-up to the market peak 10% 5000 75% + Asset bubbles (peak): ty) * 7 i 60% 4000 2 osm 4, Dow Jones (Sep-29) 9 = Gold (Jan-80) 1 50% 3 Easiest 1 a 3000 S 55% Nikkei (Jan-90) 40% LJ s * Nasdaq 100 (Mar