By: Charlene Laverty
The stock market’s running of the bulls may be about to kick off, according to Wall Street strategists. Bank of America highlights several macro trends and investor positioning that suggest 2023 could see a new bull market. The S&P 500 has already gained 8% in 2023, but BofA believes year-end gains could be even bigger.
Hedge funds have piled up their largest short position against the S&P 500 since 2011, while traders have flocked to money market funds with hefty cash positions, which have now topped a record $5 trillion. However, BofA thinks any one of the following scenarios could jolt the pessimism out of markets: an end to the Russia-Ukraine war, an increase in immigration to the US, an arms race in Big Tech spending, no recession, and investors viewing stocks as a better alternative to bonds.
Meanwhile, Tom Lee of Fundstrat, one of Wall Street’s famed perma-bulls, believes the market has already signaled a new bull market. Lee said bearish investors are now “trapped” because the possibility of a downturn has already come and gone, and a key technical indicator has just flashed. He added that since 1950, there are zero instances of the S&P 500 making a new low once it has recovered above the 200-week moving average and spent at least 15 weeks there.
Goldman Sachs and UBS analysts don’t anticipate that softer inflation will be enough to sustain a stock rally. Nevertheless, they named seven investments as a good place to earn a profit in any landscape. Retail investors are sitting on big losses in their stock portfolios even as the market climbs, and growing recession fears could make everyday traders more hesitant to participate in stocks.
Overall, Wall Street is gearing up for a crucial week of earnings reports to weigh recession risks. JPMorgan’s CEO Jamie Dimon is anticipating a storm ahead for the US economy, while market legend Rob Arnott said there’s now an 80% chance of a recession amid a credit crunch. However, Arnott also broke down his top recommendations on where to park your money as turmoil unfolds, including one trade he believes will deliver 15% yearly returns for the next decade.
