The post-election rally has clearly increased bullishness almost uniformly across the investor class, from hedge funders, to wealth management firms to main street retail investors. The initial enthusiasm is built on hope for pro-growth policies.  Even though we are in the later stages of a traditional recovery cycle people are greeting this as the dawn of new investment opportunity.  But over the past few days some cautious and dissenting voices are being heard. Is this splintering of opinion the first sign this move is not sustainable?

In some sense the initial phase is the easy part; there is plenty of money on the sidelines or in bonds earning nothing and small shift in allocation can produce large price moves over the short-term. The major indices rallied some 12% to new all-time highs in the six weeks triggering both short-covering and dragging in new buyers afraid to miss out. Price often dictates perception which in turn drives behavior. The recent rally reinforces increased bullish outlook unleashing what is often referred to as “animal spirits.”

Remember, even though this bull market is some 7 years old it has been one of the “most hated and underinvested” as people remain scarred from the financial crisis.  Then even as those wounds and balance sheets were finally beginning to heal the stock market went sideways for the past 18 months making it hard to drum up much enthusiasm.  But now this convincing breakout suggests we could be embarking on a new and sustainable leg higher.

What’s interesting to note is how quickly and from where this new bullishness arrived.  Prior to the election the consensus was a Trump victory would lead to a stock market sell-off in the 10%-20% range. We got the exact opposite.

Earlier this week Ray Dalio, famed head of the Bridgewater hedge fund, penned a post on LinkedIn https://www.linkedin.com/pulse/reflections-trump-presidency-one-month-after-election-ray-dalio?trk=prof-post which was notable as much for its bullishness and as that it represented a near 180 degree turn from his outlook prior rog the election.

Here is a key passage; “This particular shift by the Trump administration could have a much bigger impact on the US economy than one would calculate on the basis of changes in tax and spending policies alone because it could ignite animal spirits and attract productive capital. Regarding igniting animal spirits, if this administration can spark a virtuous cycle in which people can make money, the move out of cash (that pays them virtually nothing) to risk-on investments could be huge. Regarding attracting capital, Trump’s policies can also have a big impact because businessmen and investors move very quickly away from inhospitable environments to hospitable environments. Remember how quickly money left and came back to places like Spain and Argentina? A pro-business US with its rule of law, political stability, property rights protections, and (soon to be) favorable corporate taxes offers a uniquely attractive environment for those who make money and/or have money.”

Dalio is not alone in his newfound bullishness as a most financial professionals, from economist, investment bankers, private equity honchos to run-of-the-mill analysts are all optimistic—note, it the word “cautiously” is conspicuously absent from the phrase.

One group that is not only not fully on board, but has actually becoming more skeptical of late are retail investors.  The latest AAII survey shows bullish rose only 1.5% last week and still stands below 45%.

Meanwhile bearishness rose by 5.8% as the bulk of people exiting the neutral camp turned negative.

Granted, this healthy skepticism and lack of euphoria is probably a good thing as bull markets tend to climb the wall of worry. But given the fundamental backdrop in which earnings growth is still slow, valuations relatively high and interest rates rising the market will need investors to continue committing to a reallocation money out of bonds and into stock to keep the bull going.

And indeed, some respected advisors are already recommending not embracing this recent run whole hog.   “It makes total sense to take some money off the table,” El-Erian, the chief economic adviser at Allianz SE and a Bloomberg View columnist, said Tuesday. “We’ve priced in no policy mistakes. We’ve priced in no market accidents, and we’ve ignored all sorts of political issues,” he said on Bloomberg TV. In October, El-Erian said that he held about 30 percent of his own money in cash.”

The S&P 500 Index has returned 18% including reinvested dividends in this year’s stock rally. The result is a decline in the index dividend yield to 2.39 percent, below the Treasury 10-year yield around 2.57 percent. Meaning stocks no longer extra yield but they still carry more risk.

U.S. high yield bonds have returned almost 17% this year, based on the Bloomberg Barclays indexes. They pay about 4 percentage points more than Treasuries, the narrowest spread in more than two years.

Any large fiscal stimulus risks stoking inflation more than growth, and in turn boosting interest rates that then hurt shares. The move would be a risk to “the equity market party,” and could cause a self-fulling cycle of selling.

The upshot is, I’m keeping the “caution” in my optimism.