Strategist Short Squeeze Is On. Investors Beware.
The only constant in life is change — and Wall Street strategists trying in vain to divine the stock market’s future. After collectively missing the lion’s share of the year-to-date rally in the S&P 500 Index, the Street’s macro soothsayers appear to be getting modestly more bullish again.
Here’s the latest from Bloomberg News on what my Opinion colleagues John Authers and Isabelle Lee have aptly dubbed the “Great Strategist Short Squeeze”:
"There’s a shift in tone happening across Wall Street. Oppenheimer Asset Management’s Chief Investment Strategist John Stoltzfus lifted his target on the S&P 500 Index to a Street high, a day after Morgan Stanley’s Michael Wilson, one of the market’s leading doomsayers, sounded less bearish than usual."
Stoltzfus, who — to his credit — has been more bullish than most this year, now projects that the S&P 500 will reach 4,900 by the time we ring in 2024, a 6.7% increase from Wednesday’s close and the new most optimistic outlook among strategists surveyed by Bloomberg. Citigroup Inc.’s Scott Chronert also raised his 2023 year-end call for the gauge to 4,600 from 4,000 previously (and to 5,000 by mid-2024 from 4,400). While the average forecast from strategists surveyed by Bloomberg still has the S&P 500 declining through the end of the year, the momentum is clearly shifting.
One possible implication of the “short squeeze,” of course, is that the improving outlooks could become self-fulfilling prophecies. In a traditional short squeeze, investors that had been betting on market declines are forced to buy shares to close out their short positions, inducing a temporary spike in the underlying asset. Something vaguely similar could take place in the S&P 500 over the near term as bearish thought leaders throw in the towel and their followers buy back into the market.