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Virtually Every Wall Street Strategist Expects "No End To The Bull Market"

Tyler Durden's picture




 

Soaring junk bond redemptions; rising investment grade (and high yield) yields pressuring corporate buybacks; record corporate leverage and sliding cash flows; Chinese devaluation back with a vengeance; capital outflows from EM accelerating as dollar strength returns; corporate profits and revenues in recession; CEOs most pessimistic since 2012, oh and the Fed's first rate hike in 9 years expected to soak up as much as $800 billion in excess liquidity. To Wall Street's strategists none of this matters.

As Bloomberg notes, virtually every single sellside "strategist" doubles down on Barron's cover store from this weekend in which "experts" predict another 10% increase in stock prices in 2016 (just ignore their forecast about 2015), and agree that despite the Fed's rate hike, there will be no end to the bull market.

Here, courtesy of Bloomberg, is what most equity strategists expect will happen tomorrow and in the weeks and months after.

BOFA

  • Big “flight to cash” ahead of Fed meeting, BofA strategists write in Dec. 10 note
  • Money-market funds saw $48b in inflows past 4 weeks; $212b in 2H, “dwarfing” $31b equity inflow, $27b bond outflows
  • Europe equities saw $3.5b in inflows in Dec. 9 week, largest in 14 weeks with inflows in 28 of past 30 weeks
  • U.S. equities saw $9.2b in outflows, largest in 13 weeks
  • EM equities saw $1.7b in outflows, 6th week of outflows

RAYMOND JAMES

  • A trading bottom will coincide with the Fed rate decision, Jeffrey Saut, chief investment strategist at Raymond James, writes in Dec. 14 note
  • “The equity markets are massively oversold, support levels are at hand, and everyone is bearish”

CREDIT SUISSE

  • First Fed rate hike has historically caused decline of ~7% in equities, though it has never marked end of a bull market and 6 months later equities are up 2.2% on average from pre- Fed tightening levels, Credit Suisse equity strategists including Andrew Garthwaite write in Dec. 10 note
  • U.S. stocks have always underperformed in the 6 months following the first rate hike
  • Purpose of Fed rate hike this time is “more benign than usual”: to insure against financial asset bubbles and to create room for easing into the next recession, not to control inflation by slowing down growth
  • Fed rate rise won’t signal equity bear market, until yield curve inverts or U.S. reaches full employment
  • In Asian equities, heavily-geared stocks with unhedged U.S. foreign debt, importers, among cos. likely to be the most affected by Fed hike, while Asian banks may benefit from widening of loan spreads, Credit Suisse analysts Manish Nigam and Mujtaba Rana write in Dec. 15 note

CITI

  • On average after first Fed rate hike, global equities wobble then recover, U.S. equities underperform and cyclicals beat defensives, EM equities do not consistently respond badly to the first Fed hike, Citi strategists write in Nov. 20 note
  • “Given significant differences in this cycle it is difficult to make equity calls in response to this Fed hike. Nevertheless, the previous experience of a market setback followed by a recovery may be repeated”

MORGAN STANLEY

  • Morgan Stanley strategists including Graham Secker see a period less favorable to USD strength, and commodity price weakness, following Fed meeting, according to Nov. 30 note
  • In start of last six Fed rate hike cycles, energy and materials stocks have been 2 of the most consistent outperformers, with both beating the wider market on 5/6 occasions

JPMORGAN

  • JPMorgan equity strategists including Mislav Matejka and Emmanuel Cau think first Fed hike should be interpreted as confirmation of improving sentiment, should be a positive for equity markets, they write in Dec. 7 note
  • However, Fed tightening happening very late in the cycle
  • “Typically, the first hike takes place within 12 months from the end of last recession. This time around we are close to 7 years”

BLACKROCK

  • With a rate hike largely expected, investors will focus on Fed language, Russ Koesterich, BlackRock’s global chief investment strategist writes in Dec. 14 note
  • “Our base case is that the Fed will go out of its way to stress that the tightening cycle will be gentle and gradual”
  • First hike not a threat; other factors are, such as collapse in oil prices which raises more questions over asset classes ranging from high yield bonds to emerging markets

AXA IM

  • In run-up to Fed meeting, investors increasingly concerned about confusion from fact that U.S. credit market much more pessimistic than the stock market, Maxime Alimi, investment strategist at AXA IM, says by phone today
  • Overall, equities should react positively to Fed rate hike, “as long as the message on the path for future rate hikes is clear, that would bring visibility”
  • Issue for EM stocks mostly about a repricing of new regime of economic growth in EM; Fed rate hike shouldn’t have much impact

BNP PARIBAS

  • Emerging markets have enjoyed “free lunch” from zero U.S. rates and access to cheap USD debt, however with with Fed liftoff now imminent, this is drawing to an end, BNP Paribas economist Richard Iley writes in Dec. 15 note
  • Macro momentum in much of EM remains dismal, with close to a record number of manufacturing PMIs below the 50 breakeven level
  • Downdrafts of more USD strength, slowing Chinese industrial demand and swooning commodity prices “still in force”

HSBC

  • Too early to sell equities on the first U.S. rate rise, HSBC equity strategists Peter Sullivan and Robert Parkes write in Dec. 14 note
  • Equities may wobble on the news but are usually higher within a year. Monetary policy will remain supportive of growth well after first hike
  • Consumer sectors most vulnerable; energy stocks typically outperform and the sector is supported by attractive valuations and signs that the earnings may have bottomed
  • High yield equities could fare better: tightening cycle to be gradual; bond yields to fall; evidence that high yield sectors are losers from higher interest rates is “far from convincing”

DEUTSCHE BANK

  • Deutsche Bank strategists expect world economy, financial markets to weather the turn in policy “reasonably well”, according to Dec. 8 note
  • Expectation that major central banks, Fed in particular, will be “moving far more cautiously than they have in the past” as they withdraw accommodation
  • Equities should remain resilient and presenting some upside, as long as the rise in rates is limited and orderly

BARCLAYS

  • Fed rate hike could be catalyst for switch away from quality and bond proxy sectors into value and cyclicals, Barclays strategists including Ian Scott write in Dec. 10 note
  • “Equity investors do not seem to be pricing in this event from a sector perspective”
  • Outperformance of bond-proxy sectors puts them at level of price/book valuation that has only been seen previously during sovereign debt crisis and financial crisis

WELLS FARGO

  • Equity strategists including Gina Martin Adams and Peter Chung write in Dec 14 note they believe higher short rates, starting with a Fed rate hike this week, are likely to induce volatility for rate sensitive shares in coming year
  • “Despite evident financial market weaknesses, we do not recommend investors rotate into defensive sectors and industries”
  • They see momentum and quality styles most likely to drive outperformance in 2016

Thanks to this we know that every single bank is positioned on the same side of the trade; last time we checked with the comparable positioning in the EURUSD ahead of the ECB's announcement, this type of herding tends to have unfortunate consequences.

Source: Bloomberg

 

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Tue, 12/15/2015 - 10:37 | 6925477 Cangaroo.TNT
Cangaroo.TNT's picture

The 10% gains that failed to materialize in 2015 will just compound onto 2016's inevitable 10% gain.  Buy now while you still can.

Tue, 12/15/2015 - 11:29 | 6925774 Angel_Eyes
Angel_Eyes's picture

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Tue, 12/15/2015 - 13:30 | 6926377 bob_stl
bob_stl's picture

Sideways is the new bull.

Tue, 12/15/2015 - 11:48 | 6925916 sun tzu
sun tzu's picture

Buy now or be priced out forever

Tue, 12/15/2015 - 10:37 | 6925480 surf0766
surf0766's picture

Housing only goes up

Tue, 12/15/2015 - 10:50 | 6925548 Kirk2NCC1701
Kirk2NCC1701's picture

"It's always a good time to buy".

Where else have I heard that?  PM?

p.s. I admit that TD got me again with the Clickbait thumbnail pic of the article headline.  Wish that TD would listen to us for once, and allow a hi-res version of thumbnails, if you click on them.

Tue, 12/15/2015 - 11:02 | 6925621 Jtrillian
Jtrillian's picture

This is EXACTLY the same mentality they had about the housing market.  It's EXACTLY the same mentality they had about the TECH BUBBLE. 

Humanity, you really don't give me much hope.

Tue, 12/15/2015 - 12:18 | 6926086 ebworthen
ebworthen's picture

Jeffrey Ssut of Raymond James would say that everything only goes up - as long as you keep giving us your money.

Tue, 12/15/2015 - 10:40 | 6925490 madcows
madcows's picture

Well, shit, who would.

With a digital printing press, there will be no end to our prosperity.

Really, with endless free money, would you expect the market to go down?

The FED's plan is to hyper inflate away all debt.  that $700 trillion in derivatives needs to go away.

Tue, 12/15/2015 - 10:41 | 6925499 pods
pods's picture

Some shill (business analyst) was being interviewed on the radio this morning talking about the Fed hike.  She was oozing with sleeze about how our economy is doing and how the Fed is justified.

The whole system is captured. If people derive their income from this casino, they are not going to state the obvious.

The real economy is dead and is not coming back.  The only thing left is to find another avenue to expand leverage.

pods

Tue, 12/15/2015 - 10:44 | 6925524 Mike in GA
Mike in GA's picture

Pods:  "The whole system is captured" is as succint a summary of our current predicament as there is.

Tue, 12/15/2015 - 11:27 | 6925764 Omen IV
Omen IV's picture

The Devil is in the details - Economists on the contract payroll of the Fed are approaching close to 100%

 

look at in-vitro fertilization rates in the US.

That’s because the IVF process, at $10,000 to $15,000 a pop, may turn out to be as good an indicator of the nation’s economic health as any more-traditional measures.

And since August, the number of IVF procedures in the US has dropped 30 percent — and doctors are scratching their head and trying to figure out why.

I agree that this falls into the “who knew?” category. And, admittedly, IVF — a process in existence only since 1978 — is too new to produce the kind of scientific track record that academics like.

But Dr. Norbert Gleicher, medical director and chief scientist at the Center for Human Reproduction in Manhattan, thinks the drop portends bad news for the US economy.

“We saw a clear dip,” says Gleicher, who spoke with me last week. And not only in his clinic. “I’m hearing from my colleagues that it is happening all over.”

Such a sharp drop-off is extremely odd in the IVF community.

Gleicher says that, “in 2008, we saw a significant downturn three to four months before the recession officially started.” In 2008, the gross domestic product fell 0.3 percent.

Tue, 12/15/2015 - 12:59 | 6926245 MrSteve
MrSteve's picture

Contrary to your wishes, SEC's Mary Jo says no mo' quik'n EZ ETF leverage. SEC wants to cap leverage at 1.5X. We are protected from ourselves, watta country!

http://www.smartbrief.com/s/2015/12/sec-approves-proposal-limit-leverage...

Tue, 12/15/2015 - 10:41 | 6925503 kralizec
kralizec's picture

If everything is awesome I'd hate to see the opposite!

Huh, what?  What do you mean I can't look there?!

Tue, 12/15/2015 - 10:41 | 6925507 Winston Churchill
Winston Churchill's picture

Capsizing is alaways a problem on party boats.

Tue, 12/15/2015 - 10:50 | 6925558 pods
pods's picture

And this one's loaded like a Bangladeshi ferry.

pods

Tue, 12/15/2015 - 10:54 | 6925587 TeamDepends
TeamDepends's picture

And it's a booze cruise heading into the Perfect Storm.

Tue, 12/15/2015 - 11:55 | 6925975 TuPhat
TuPhat's picture

But, but, stocks are shooting up today.  Give me some of that interest please.  I promise to buy some junk at Walmart with it just to boost the economy.  The chinese will profit and after all its only the global things that really matter.  /s

Tue, 12/15/2015 - 10:43 | 6925514 MopWater
MopWater's picture

The saying goes, if you tell yourself a lie long enough, it becomes your reality...

Problem is, the Fed has no interest, and Wall St havsnt the stomach to return the market to some semblance of reality, they just want to sit in the smoke of their ZIRP opium den.

Tue, 12/15/2015 - 10:45 | 6925527 Bruce Gender
Bruce Gender's picture

Blackrock's Mark Wiedman on Bloomberg this morning: "the retail investors isn't retiring for years, so high yield could be great for them"

 

Then some other fund manager went on and they engaged in a mutual circle jerk about retail investors don't need to worry about liquidity.

 

But then the biotch Stephanie Ruhle actually brought up a great question: "you guys tout liquity in these ETFs but the retail investor shouldn't be worried?"

 

Of course, the two fund managers had to dismiss that question. Fuck this shit.

Tue, 12/15/2015 - 10:47 | 6925539 gmak
gmak's picture

1. FED needs market up to justify necessary rate hike ( or loss of all jawboning control of 'market');

2. Investment parasites need market to stay up for best (and last) performance payoff as at Dec 31

3. Buy rumour; sell before Dec 31st. Watch smugly for smack down in New year as $800 billion in liquidity taken from market and Investment parasites get caught in vanishing margin sell off. Muppets reamed again as they have been convinced taht rate hike is bullish (better economic conditions).

Tue, 12/15/2015 - 10:51 | 6925564 falak pema
falak pema's picture

SO WHY PANIC ???

Tue, 12/15/2015 - 10:53 | 6925574 jtmo3
jtmo3's picture

Are you kidding me. If 9 years hasn't taught you that whatever else happens, as long as the FED has ANY sort of control over anything, the market will not fucking dump. Has this not been obvious to anyone with a brain and a set of eyes. If all else fails, the market will be propped. How many times does the FED have to knock you over the head with this reality?

Tue, 12/15/2015 - 11:15 | 6925690 scubapro
scubapro's picture

so exactly what happened from May 2008 to Nov 2008  ...while the fed claimed subprime contained, lowered rates consistently, and took over the large mortgage packagers??

Tue, 12/15/2015 - 11:46 | 6925900 jtmo3
jtmo3's picture

The setup. You don't think the FED was going to take over the "market" without justification, do you? Now they have their control. Their banks are making quick money. The people are placated (market up headline). Just remember the old axiom...nothing in politics happens by accident. With this much money and control at stake, don't expect them to leave anything to chance...ever again at this point. Anything resembling a real market, is gone for the rest of your lifetime. If the market drops, you can bet your ass there was a reason for it. Investment is gone. You're playing with a casino at this point. Period.

Tue, 12/15/2015 - 12:46 | 6926196 Deus Irate
Deus Irate's picture

You forgot "rigged" old bean. If I may elaborate further? The only players who lose are either politically dangerous or simply chosen at random as grist for the bread-and-circuses mill -- the latest perp-walk if you will, prominently displayed on the evening "news". (See: Volkswagen) Lucky and Meyer were amateurs by comparison, but their methods have won in the end. Ain't America great?

Tue, 12/15/2015 - 11:44 | 6925876 Barrack Chavez
Barrack Chavez's picture

The key clause in your statement "as long as the Fed has any sort of control over anything"...

There in lies the big problem. The Fed has lost credibility. If they can't "control" (your word, not mine) people to borrow (and lend) at zero percent, obviously they lost control already.

BTW -- the subprime contagion remains just as well contained as it was in 2007-8...

Just ask that asshole Bernanke who collected another $200K speaking fee while taxpayers were working real jobs (or unemployed)

Tue, 12/15/2015 - 10:53 | 6925579 Tejano
Tejano's picture

Lift off!

Tue, 12/15/2015 - 10:53 | 6925581 Peter Pan
Peter Pan's picture

I agree with the Wall St strategists.

There is definitely no end to the market in bull.

I am not trying to be funny. What we are seeing is a market fanned and sustained by sheer bull.

Tue, 12/15/2015 - 10:58 | 6925604 firstdivision
firstdivision's picture

Tops in bitches.  Sell the rally at GTFO.

Tue, 12/15/2015 - 11:17 | 6925696 toadold
toadold's picture

Well if someone offers you a wooden nickel, take it. It will soon be worth more that a paper dollar.

Tue, 12/15/2015 - 11:18 | 6925703 frankly scarlet
frankly scarlet's picture

as long as those failing happen in a piece meal manner the Fed system can paper over anything....but should several sizable EMs collapse and default simutaneously it may be too big to paper over and then, well ......the debt money system fails.

Tue, 12/15/2015 - 11:26 | 6925754 Allen_H
Allen_H's picture

It's fantasy economics, fantasies don't have to end if you control the switches. Till the power runs out.

Tue, 12/15/2015 - 11:29 | 6925776 Clowns on Acid
Clowns on Acid's picture

The Russian stock market never fell under Krushchev either.

Tue, 12/15/2015 - 11:40 | 6925855 Barrack Chavez
Barrack Chavez's picture

Every Wall Street strategist was bullish in 2007, every Wall Street strategist called Black Monday, every Wall Street strategist got a hole in one, and every Wall Street strategist caught a fish "this big" but it got away seconds before they could snap a picture.

Has anyone ever seen an advertisement that says "our product is no good, keep your money or buy something else!" ???

Tue, 12/15/2015 - 11:40 | 6925858 Baby Eating Dingo22
Baby Eating Dingo22's picture

Forward thinking market that it is

Already got the 7%

2.2% gain- check

Blue skies ahead

-----------

First Fed rate hike has historically caused decline of ~7% in equities, though it has never marked end of a bull market and 6 months later equities are up 2.2% on average from pre- Fed tightening levels, Credit Suisse equity strategists including Andrew Garthwaite write in Dec. 10 note

Tue, 12/15/2015 - 11:44 | 6925886 Baby Eating Dingo22
Baby Eating Dingo22's picture
Stocks ready for 'rip your face off' rally: Saut
Tue, 12/15/2015 - 11:53 | 6925955 Consuelo
Consuelo's picture

 

 

Like so many others of his ilk, Mr. Saut has been 'right' for the past 5 or so years, but for all the Wrong reasons...   He'll get the comeuppance Bitch-slap that cartwheels his sorry ass (and reputation) across the room, all in good time.

 

 

Tue, 12/15/2015 - 11:50 | 6925930 Consuelo
Consuelo's picture

 

 

U.S. foreign policy.   Really the only thing to keep a close eye on these days.   It's going to dictate a lot more than most financial 'experts' think.

 

 

Tue, 12/15/2015 - 11:53 | 6925954 bnbdnb
bnbdnb's picture

I love this part... Everyone is too bearish, except everyone of us.

Tue, 12/15/2015 - 11:55 | 6925966 tongue.stan
tongue.stan's picture

Long camel toe and sweater puppies.

Tue, 12/15/2015 - 11:58 | 6925990 Zero-Hegemon
Zero-Hegemon's picture

Everyone is long in those markets, futures are bright!

Tue, 12/15/2015 - 11:58 | 6925986 Zero-Hegemon
Zero-Hegemon's picture

Well of course, they don't see it coming, the end that is

Tue, 12/15/2015 - 12:12 | 6926049 RawPawg
RawPawg's picture

while i'm not an "expert" like all these big institutions; i did an informal survey at my local rural groc store(btw..the only big retail groc store around)

i asked the employee stocker about business

she told me business was off..ppl only coming in to buy just what they needed to get by..that spoke volumes to me about how bad it really is on the streets of a semi-rural area

i listen to the streets(and value) more then i believe those in the business of telling lies just to take more of your money

just for what it's worth.

Tue, 12/15/2015 - 12:15 | 6926075 roadhazard
roadhazard's picture

Americas Team

Tue, 12/15/2015 - 13:33 | 6926285 rwe2late
rwe2late's picture

 Rising stock prices and CEO bonuses

will continue so long as

workers can be laid off, pension contracts denied,

company assets sold or mortgaged,  business swap option debts multiplied,

and government bail-outs and hand-outs to corporations guaranteed.

 

The exact tipping point for all the above to bleed itself dry

and cause exponential economic collapse

remains to be seen.

 

Tue, 12/15/2015 - 13:17 | 6926323 PoasterToaster
PoasterToaster's picture

People should start suing brokers when they lose money.

Tue, 12/15/2015 - 14:13 | 6926607 Sir John Bagot Glubb
Sir John Bagot Glubb's picture

To do so, a plaintiff has to allege a misrepresentation or material omission in connection with the purchase or sale of a security.  Is not the case just because your investments go down............

Tue, 12/15/2015 - 14:09 | 6926580 Sir John Bagot Glubb
Sir John Bagot Glubb's picture

It is difficult for me to understand how ALL these people can be so wrong, in fact 180 degrees wrong.  There's an old German saying, "When 10 people tell you you are drunk, you'd better lie down."  

The only explanation that I can figure, given that these people are effectively on "the inside", is that they are each convinced that the government and the Fed have the power to create prosperity indefinitely regardless of fundamentals.  If you thought that, you certainly wouldn't have to do much research, let alone thinking.  And there's some basis for that bias when you figure that the government controls all the levers and can pass laws, issue regulations and print money almost indefinitely to fix whatever--or so it must seem to them.

The other explanation is that they believe that perception dictates reality and so they want to perpetuate the "proper" perception amongst investors and the media.  That, they must think, will continue the bull market regardless of anything else. 

A third reason is that being stockbrokers, they don't do much for their credibility if they advise their clients to sell or "lighten up" and then the market goes up and the client loses money.  Accordingly, they are all advising all their clients to "stay the course."  (I had a big shot broker tell me at a party not to read ZH, that it was "negative" and would adversely color my thinking.)

A fourth reason is that they don't make any money telling clients to sell stocks and buy physical precious metals from Peter Schiff unless they can induce clients to buy Canadian PM funds like PHYS, PSLV, GTU, CEF, SVRZF, etc., investments far safer than GLD and SLV.  But those investments are just as unsavory for stockbrokers to recommend because it acknowledges that things are bad.  Can't have that. 

A fifth reason..................?????????

 

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