Bullishness is in the air. Last week Morgan Stanley and RBC Capital said we were only in the early stages of the bull market. And that was followed by an uber-bullish Barron's cover story.
All year Deutsche Bank's David Bianco held the title of most bearish strategist on Wall Street for 2014. With a measly 1,850 year-end target for S&P 500, Bianco was caught behind the curve as the bull market extended its historic five-year long run.
In a new research note to clients, Bianco cranks up his 2014 and 2015 calls and unveils a big 2016 call. Here's a summary:
- 2014 S&P 500 target: 2,050 (previously 1,850)
- 2015 S&P 500 target: 2,150 (previously 2,000)
- 2016 S&P 500 target: 2,300
Currently, the median year-end target for the S&P 500 is at 2,000, which puts Bianco on the bullish side.
The worry for market watchers and investors is that we're running out of bears to keep the bulls in check. In other words, the market may be a little too exuberant and may be at risk of a violent sell-off.
A recent Investors Intelligence survey revealed that bearishness is now at its lowest level since 1987.
"The history of Sentiment reminds us that it’s more dangerous to have an evaporation of bears compared to a plethora of bulls," said FBN Securities' J.C. O'Hara.
For now, Bianco believes the fundamentals are on his side.
"We still expect a long lasting economic expansion of moderate growth, which should rival the US record of 10 years with S&P EPS growth averaging 6% until the next recession, on 5% sales growth, flat margins, 1% share shrink," Bianco wrote. "Despite entering the latter years of a typical expansion and high margins vs. history, we now think the trailing S&P PE should average 17 vs. 16 until elevated recession risk returns."
Like most strategists, Bianco doesn't see a market downturn happening with out a recession. This is bullish as most economists are convinced that a U.S. recession is a ways off.
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