By Barbara Kollmeyer, MarketWatch
Ronald Grant Archive / Mary Evans
All is merry and bright.
Will we get the start of a Santa Claus rally? That is, typical late-year gains for stocks around the holidays. It may depend on this trade deal action, as investors wait for news from China. That’s as another lingering concern for markets may have just been swept away—the U.K. Conservative Party cruised to victory and smoothed the path for a long-delayed Brexit.
Our call of the day, from investment firm BTIG’s chief equity and derivatives strategist Julian Emanuel involves what appears to be the S&P 500 forecast on Wall Street—3,450 by the end of 2020.
“It’s absolutely shocking to us that it’s the most bullish forecast on the Street. And the fact that it is the most bullish leads me to believe that we’re probably going to be too low,” Emanuel tells MarketWatch in an interview.
His upbeat view is based on a strongish economy and a Federal Reserve that is “clearly committed” to seeing inflation move higher, which means the economy may run above potential growth for a while. Then there is the historical data that shows the years that follow 20% or more tend to average returns of 14.3%, says Emanuel.
And if the rumored trade deal materializes, it means the S&P may reach his upper year-end target of 3,950 “particularly if there is upside to the deal being ‘bigger’ than the market expects,” he said.
As well, the recent advent of zero-fee online stock trading from Charles Schwab /zigman2/quotes/201281754/composite SCHW +0.74% and others has made the media and investors “focused on the idea of investing once again.” That may just combine with an end-of-the-bull-market run where investors have historically piled into assets, he says.
The Dow /zigman2/quotes/210598065/realtime DJIA +1.39% , S&P /zigman2/quotes/210599714/realtime SPX +0.64% and Nasdaq /zigman2/quotes/210598365/realtime COMP +0.52% are down in early action as investors await word from China on trade talks. Asian stocks /zigman2/quotes/211618636/realtime XX:ADOW +0.21% rallied and Europe /zigman2/quotes/210599654/delayed XX:SXXP +0.49% also had a powerful day, while the pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.1068% gave up some hefty gains it saw after those U.K. election results.
Bank of America Merrill Lynch’s Flow Show note reveals investors primed for gains in the first quarter of the year. Its contrarian Bull & Bear indicator chart has reached an 18-month high of 5.4, as investors turn bullish.
Its gauge indicates whether buying or selling of stocks has gone too far either way. The closer the needle nears 0—least bearish—and closer to 10—most bearish. The rule: when investor sentiment is over 8, sell equities, and under 2—buy.
That is President Trump offering congratulations and a potential trade deal to U.K. Prime Minister, Boris Johnson who nailed a crunch election.