Despite the big gains, not everyone is feeling bullish. In fact, some are recommending investors sell the bounce. For instance, In an email sent to clients this morning, Hedgeye reiterated its bearish call made back in September with these frightening words: ”We think the worst is yet to come.” InvesTech Research, meanwhile, sent out a note a special edition of its newsletter, recommending that investors dial back their exposure to the market to 55% from 63%.
These aren’t the permabears who never met a market they couldn’t short–they’re firms that have tried to time the market, and this time both appear to have gotten it right.
But how right? For now, we’re taking out cues from Morgan Stanley ’s Michael Wilson, another bull turned bear, albeit one who was a bit early on the turn. In the firm’s 2019 outlook, published today, Wilson argues that the S&P 500 is stuck in a range, one that could see it trade as high 3000 in the bull case, as low as 2400 in the bear case, and 2750 in his base case.
The good news: This is not the beginning of a bear marker like the ones experienced during the dot-com bust and the Financial Crisis. “2019 likely will be another year of cyclical consolidation in a secular bull market, meaning more range-bound and volatile markets,” Wilson writes.
Is a range the best we can hope for?
Write to Ben Levisohn at