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Morgan Stanley's Adam Parker completes his turn from one of the Street's most bearish to its most bullish investment strategist with his S&P 500 2014 in 2014 target - an 11.5% advance from here. "The only thing people are worried about is that no one is worried about anything," he says ... "That isn't a real worry."
He's not discounting the chance of a "Pavlovian" sell-off amid taper banter, but says any spring dip as the taper commences will be a buying opportunity "unless our outlook for corporate earnings markedly deteriorates.”
"It isn’t preposterous to say that we could be in an environment of synchronous global economic expansion in 2014, and tapering or not, that isn’t fully in today’s prices.”
It's the bull market everyone continues to hate ... BAML's sell-side indicator - a contrarian take based on attitudes of strategists - continues to read in extreme bearish territory, suggesting more gains ahead for stocks. The level of bearishness now is actually greater than that of the March 2009 market bottom.
"I am out of justification to fight the uptrend," says Tom McClellan, becoming the latest bear to throw in the towel. “Up until now, I have had what I thought was compelling evidence to believe in the bearish case, but it has now been revealed to have been insufficient for the task.”
In other news, RBC's Jonathan Golub checks the data and finds big years for the S&P 500 are likely to be followed by ... big years. Since 1947, he says, the S&P 500's top-10 performing years have averaged a 31% gain, and have been followed by average returns of 14% in the 12 months after.
More McClellan: "I see this as a bubble, but a bubble that is continuing higher even though it should not ... I plan to ride the bubble for a while ... and will hope to be able to succeed in reading the right signs."
Stock index futures are little-changed as the Thanksgiving holiday nears, but a few earnings reports continue to roll in - notably H-P after the closing bell - and there's a big slate of economic data on tap today.
Europe's about flat and Asia didn't move much overnight either.
The 10-year Treasury yield is off one basis point at 2.72%.
Can you say priced in? Oil's up marginally this morning - added to yesterday's afternoon bounce, it's nearly completely erased the large knee-jerk decline following the Iran deal.
The rollout of Goldman's top trade ideas for 2014 begins with a Gartmanesque long S&P 500 (SPY)/short Australian dollar (FXA) recommendation. Bullish on equities, Goldman finds a perfect counter in the aussie, which - the team notes - has increasingly become negatively correlated with U.S. interest rates.
The aussie also has its own headwinds - a slowing domestic economy and at least one more rate cut coming from the RBA. The end-of-2014 forecast by Goldman is $0.85 vs. todays $0.9153 (it was $1.06 about 7 months ago).
Stock index futures are ahead about 0.4% amid a reasonably-sized global rally. The deal with Iran provides a nice excuse for headline writers, but it's a bull market - no news is necessary. Brent crude oil is lower by 1.6%, and gold continues its slide, -1.1% to $1,231.
Europe's up moderately, and Asia was mostly higher overnight.
The 10-year Treasury yield is up one basis point to 2.76%.
As the taper approaches, it may be time to ring the register and book some gains, Barron's thinks. Add in the fact that the S&P's 26% YTD gain has "likely [left] many investors with a higher mix of stocks than they would prefer," and the issues isn't whether or not to sell, but rather "what to sell and where to put the cash."
Food for thought from Jack Hough: "The S&P 500 trades above 17 times trailing earnings, versus a historical average of about 15 [and] U.S. shares are 57% more expensive than emerging markets and 67% more expensive than Europe" based on "a long-term average of earnings to adjust for cyclicality."
Investors might want to consider putting small companies on the chopping block first, as they have outperformed their larger cap counterparts this year and their P/E premium to large caps has stretched well beyond its historical average.
Making the rounds across trading desks is this chart showing the near-exact correlation of the S&P 500's current run with that of the index in the years just up to the1929 crash.
Sadly for the bears, the chart probably says more about the human brain's tendency to see patterns where none exist, or as BTIG's Dan Greenhaus puts it, "Chart overlaying is lazy." The chart's popularity tells Greenhaus everyone wants to believe everyone else is "all bulled up."
David Tepper shows us what a real bubble looks like, holding up a chart of P/E multiples from 1995-2000 vs. 2008-today. The 95-00 line goes straight up, while the 08-13 line is flattish. The first period was a clear bubble, but today isn't, and in fact deserves a much higher multiple than existed in 2008.
Up about 40% this year, what's Appaloosa looking at for 2014? Tepper says he's recently put on a Treasury (TLT) short, but doesn't expect rates to go a whole lot higher.