The Business Insider says the average call, across 14 top market forecasters, is for the S&P 500 to touch 1,955 by 2014-end. This would imply another 7% upside from Friday’s close of 1831. And that’s on top of the nearly 30% the index has already put on in 2013.
So market analysts are still bullish about the equity market in 2014, though expectations for growth are somewhat muted.
What about investors at large?
“Our Panic/Euphoria model remained in euphoria territory…Euphoria readings indicate the market may retreat with an 83% historical probability of losses in the next 12 months,” says Citi’s Chief US Equity Strategist, Tobias Levkovich and analysts Lorraine Schmitt and Christina Wood, in their latest PULSE Monitor of January 3.
David Einhorn's Greenlight Capital returned -2.9% in the second quarter of 2021 compared to 8.5% for the S&P 500. According to a copy of the fund's letter, which ValueWalk has reviewed, longs contributed 5.2% in the quarter while short positions detracted 4.6%. Q2 2021 hedge fund letters, conferences and more Macro positions detracted 3.3% from Read More
The Panic/Euphoria reading was at 0.60 as shown in the chart below in the red ellipse:
Note that whenever Citi’s Panic/Euphoria (Other PE) reading has crossed above the upper blue line and into the Euphoria region in the past, the market has become vulnerable to a correction.
Cyclical Expectations Model also soars
Citi’s other measure of sentiment, its Cyclical Expectations Model, also pushed higher during the week, as shown by the red arrow in the chart below.
“Intra-stock correlation has fallen to just above 30%, showing that macro has receded from the collective mindset as a source of market discontent,” says Citi, indicating the pervasive bullish sentiment now prevailing.
Equity fund inflows – one way ticket?
Meanwhile, investors continued to throw money at equity funds – according to Citi, for the week ended December 25, $1.79B was added to equities, even as bond funds continued to bleed and lost $3.59B.
“The 2009 Generational Bottom is replaced as the reference point for the current bull market with the new all-time highs of 2013. An acknowledgement of the fact that this is a secular bull leads to a rethinking of its starting point – just as we refer to the start of the ’82 bull market from the new high and not the 1973 low.”