/Need to Know: Why Wall Street’s most bullish strategist says his S&P 500 forecast is probably too low

Need to Know: Why Wall Street’s most bullish strategist says his S&P 500 forecast is probably too low


All is merry and bright.

Fresh records for stocks and the start of a Santa Claus rally—typical late-year gains for stocks around the holidays—look to be in the offing as hopes rise that a phase one trade deal will be announced soon. 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.

Such optimism fits in with our call of the day, from investment firm BTIG’s chief equity and derivatives strategist Julian Emanuel, who appears to have the most bullish 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

SCHW, +2.96%

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 market

Dow

YM00, +0.46%,

S&P

ES00, +0.40%

 and Nasdaq

NQ00, +0.50%

 futures are climbing, and Asian stocks

ADOW, +1.87%

rallied. European stocks

SXXP, +1.70%

are powering ahead, while the pound

GBPUSD, +1.7016%

 has given up some hefty gains it saw after those U.K. election results.

The chart

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.

The tweet

That is President Trump offering congratulations and a potential trade deal to U.K. Prime Minister, Boris Johnson who nailed a crunch election.

The buzz

China is staying silent on whether a U.S. trade deal has been reached. The situation remains “delicate,” tweeted Hu Xijin, the influential editor in chief of China’s state-controlled Global Times.

Adobe

ADBE, +0.73%

 stock is headed for record highs after the software group’s upbeat revenue gains, while shares of chip maker Broadcom

AVGO, +2.53%

 are up after its outlook topped forecasts.

Amazon

AMZN, +0.66%

 is now offering the voices of celebrities like Samuel L. Jackson to pipe up when users summon the e-commerce company’s virtual assistant Echo.

Retail sales and import prices are coming ahead of the open, followed by business inventories.

Random reads

House Judiciary Committee abruptly delays impeachment vote

Experts say we need to reach ‘peak meat’ consumption in 10 years to battle climate change

New Zealand recovers six bodies in risky operation days after deadly volcano eruption

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