2023-12-06 03:15:00
U.S. stocks are rising sharply at the end of a tumultuous year, but market strategists at Oppenheimer Asset Management warned that the rebound, which has helped the three major stock indexes achieve five consecutive weeks of gains, may mean that stocks are overbought. , and sounded the alarm for the trend in 2024.
A team of Oppenheimer strategists led by John Stoltzfus, chief investment strategist and managing director at Oppenheimer, said: “We believe that the current year-end rebound from the October lows is constructive, but it also raises some concerns. Rushed gains in five weeks might push stocks to ‘overbought levels’ in the short term, necessitating a pullback early next year.”
FactSet data shows that the U.S. stock market experienced a “comprehensive rebound” in November. From the end of October to December 1, the Dow Jones Index, S&P 500 Index, Nasdaq Composite Index and Russell 2000 Index, which is mainly small-cap stocks, respectively Increases of 9.7%, 9.6%, 11.3% and 12.1%.
Stoltzfus and his team said that judging from the current round of comprehensive rebound in the U.S. stock market, the small and medium-sized stock index has outperformed some large-cap indexes in the recent period, indicating that the scope of the U.S. stock market rally is expanding this year, and stocks of different market capitalizations are generally rising. The current market rally is partly due to Wall Street’s expectations that the U.S. economy will achieve a “soft landing” following the Federal Reserve takes a series of aggressive interest rate hikes.
However, the strategists said in a note on Monday that since the 2007-2008 financial crisis and the COVID-19 pandemic, financial markets have shown a tendency to quickly enter overbought or oversold states, especially when markets When the mood is seriously bearish or bullish.
A survey of investor sentiment conducted by the American Association of Individual Investors (AAII) showed that investor optimism regarding the short-term prospects for the stock market continued to rise in the week ended November 30. The latest AAII survey released on Thursday showed that bullish sentiment – the percentage of respondents who expect stock prices to rise over the next six months – increased 3.5 percentage points last week to 48.8%; this was an “abnormally high” level for August. highest level since.
Conversely, bearish sentiment on the stock market (the percentage of respondents who expect stock prices to fall over the next six months) fell 4.1 percentage points to 19.6% over the same period. The survey said this was the lowest level since January 2018 and the fourth time in 11 weeks that it fell below the historical average of 31%.
To be sure, traders and investment managers often use market sentiment as a contrarian indicator. After all, extremely bullish data makes people wonder who is still buying, and extremely bearish data makes people wonder who is still selling.
“We (Oppenheimer strategists) are not bearish, but we remember that strong year-end gains tend to be met with some skepticism in the first or second quarter of the new year as to whether there is a catalyst for profit-taking and not necessarily Worry regarding missing out,” Stoltzfus and his team said.
Stoltzfus predicted in late October that the S&P 500 would reach 4,400 by the end of 2023; that would mean the index would be down 3.5% from Monday’s 4,559, according to FactSet. Stoltzfus said earlier this year that the S&P 500 would rise above 4,900 by the end of the year. That was the highest target for the benchmark index among 20 Wall Street institutions surveyed by MarketWatch in August.
Jason Draho, head of asset allocation for the Americas at UBS Global Wealth Management, said in a report on Monday that despite the increased bullish sentiment, stock market investors are not really bullish on the macro environment or the market, “They just think Near-term downside risks are minimal.”
Draho said this also explains why the CBOE Volatility Index (VIX, sometimes called Wall Street’s fear gauge) last week fell to its lowest level since January 2020, which means Few investors now feel the need to pay to protect their investments from downside.
“Perhaps the biggest near-term risk for U.S. markets is simply that following a month of sharp gains, a period of consolidation may be necessary to take a breather,” Draho said. “A lot of the good news has been priced in, and investors see little imminent downside risk, which does leave the market vulnerable to even a small amount of disappointment.”
(This article is translated from MarketWatch. MarketWatch is operated by Dow Jones, the parent company of The Wall Street Journal, but MarketWatch is independent from Dow Jones Newswires and The Wall Street Journal.)
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