Latest Bloomberg Strategist survey highlights that even sell-side is not that constructive
Recent incoming data points to the industrial cycle bottoming and to cyclical acceleration in 2020. And as we have written in past reports, whenever PMIs recover from sub-50 readings, EPS growth sees similar acceleration.
But there remains a general reluctance to see this cyclical upturn as “risk-on.”
Even the normally “optimistic” sell-side remains cautious. As evidence, look at the latest weekly survey of sell-side strategists (by Bloomberg) for 2019 targets.
– Of the 21 strategist surveyed, only 2 see S&P 500 with upside into YE 2019.
– Markets are in their seasonally strong final 7 weeks and yet the mean Strategist target is 2%-3% lower than the current close for S&P 500.
BOTTOM LINE: We think the risk/reward remains strongly to the upside with 3,200 (+100 points) more likely than 3,100 (flat).
As we noted in our report last week, the trifecta of regions driving the cyclical recovery in 2020 are: US, China and Japan (fiscal). This is >50% of global GDP and arguably only China and US remain the two only real drivers of global GDP. Hence, we believe the recent upside breakout in S&P 500 portends strong market gains in next 24 months. While this may sound perplexing, we believe 2019 was the start of a new global equity bull market.