Fifty-six and counting. That’s the number of record closing highs the S&P 500
SPX+0.25% has registered in 2024. And we’ve only just started what is usually one of the best months of the year for stocks.
A market regularly reaching fresh peaks, with any dips swiftly bought, can make investors feel invincible. Such conviction helps power rallies, but may also contain the seed of their demise.
Veteran market maven Ed Yardeni of Yardeni Research has been upbeat about U.S. stocks all year. At the start he had, he says in a new note, the highest target on Wall Street for the S&P 500: 5,400 by the end of the 2024. That level was beaten by mid June. “We weren’t bullish enough, as the stampeding bulls left hoof marks on our backs,” Yardeni says.
So, on July 10 he raised his target to 5,800. That was surpassed the day after the U.S. election. Up he went again, forecasting 6,100 on what he calls Federal Reserve dovishness and Trump 2.0. “We remain bullish on the outlook for the U.S. economy and stock market through the end of this year and decade. We think the Roaring 2020s could turn into the Roaring 2030s,” he says.
However, he also believes: “[F]or the here and now, there may be too many charged up bulls.”
Yardeni notes the move in bitcoin
— whose breach of $100k on Thursday took its gains since the election to about 44% — as an example of the current exuberance. And he reckons that contrarian indicators are turning bearish.
One is the Investors Intelligence Bull/Bear Ratio, which has jumped from 2.3 in mid-October to 3.9 last week. The percentage of bull views is up to 62.9%, which Yardeni says is around historical highs.
Another contrarian indicator relates to moving averages. “The S&P 500 is now 11.2% above its 200-day moving average, signaling that the market may be overbought. Financials are especially overextended,” he says.
Then there’s households’ optmism about the market. The Conference Board’s consumer confidence index survey for November showed 56.4% of consumers expect stocks to be higher in 12 months. That’s a record and even more bullish than just before the dot-com bubble burst in 2000, Yardeni observes.
Finally, Yardeni notes that the 3-month moving average of foreign buying of U.S. equities by private investors hit an all-time high in September. “Historically, foreigners have been poor timers of the U.S. stock market, tending to chase rallies into blow-off tops,” he says.
All this stretched positivity suggests the market may see a pullback in January, though “that will probably be attributable to rebalancing portfolios at the start of the new year rather than the end of the old year to postpone taxes on substantial capital gains,” says Yardeni.
“So it shouldn’t last very long and would be a buying opportunity,” he concludes. Keep in mind, he’s targeting 7,000 for the S&P 500 next year — tying Deutsche Bank for the top of Wall Street.
