This Content Is Only For Paid Member
A growing chorus on Wall Street is sounding the alarm over the prevailing sentiment that there are “no bears left.” Analysts and experts express worry about the soaring investor optimism, signaling potential dangers ahead. JPMorgan Chase & Co. and Morgan Stanley equity specialists are among those cautioning against the increasingly bullish outlook, attributing it to overstretched technicals and the belief that the Federal Reserve won’t cut interest rates as swiftly as the market anticipates. This sudden shift to pessimism follows a robust November rally that saw the S&P 500 surge 9% and US bond yields decline.
Goldman Sachs Group Inc.’s Managing Director, Scott Rubner, captured the prevailing sentiment by stating that there are “no longer any bears left,” emphasizing the absence of those taking a bearish stance. The heightened caution in the markets raises questions about the Federal Reserve’s future actions and whether it will match the aggressive rate-cutting expectations priced into swap markets.
Florian Ielpo, Head of Macro Research at Lombard Odier Asset Management, warns against the excessive euphoria that marked the recent market rally, stating that valuations are no longer attractive, and equities are now deemed expensive. Investors, including BlackRock Inc. strategists, express concerns about potential disappointment in rate-cut expectations and anticipate a new regime characterized by higher rates and increased volatility.
Despite labor-market data supporting expectations of a Fed rate cut, some traders are already adjusting their positions. Fast-moving traders, especially commodity trading advisers, have significantly increased exposure to equities, prompting concerns of an impending selloff. Technical indicators, such as the S&P 500’s Relative Strength Index being above 70, suggest vulnerability in stocks.
Amy Xie Patrick, Head of Income Strategies at Pendal Group, recalibrates her firm’s wagers, considering growing risks in bond markets. While some analysts, including Bloomberg Intelligence Chief Equity Strategist Gina Martin Adams, suggest there’s room for stocks to climb higher, others, like Bank of America Corp.’s Savita Subramanian, believe that stocks are priced for perfection, signaling potential headwinds.
In this backdrop of conflicting views, the question of whether the market has priced in more rate cuts than warranted for the current economic data lingers. JPMorgan Chase & Co. strategists warn that stocks seem priced for perfection, emphasizing the need for a contrarian perspective.
