‘No Bears Left’ Is Worrying Refrain Coming From Wall Street

The message coming from Wall Street is that investor optimism is running dangerously high.

Overstretched technicals and the belief that the Federal Reserve won’t cut interest rates as quickly as markets expect are driving a sudden pessimistic turn from equity specialists at JPMorgan Chase & Co. and Morgan Stanley. As Goldman Sachs Group Inc. Managing Director Scott Rubner put it in a report, there are “no longer any bears left.”

After a roaring rally in November that sent the S&P 500 surging 9% and US bond yields tumbling, markets are now trading more cautiously. The question on everyone’s mind is whether the Fed will actually start cutting rates as aggressively as what’s been priced into swap markets, or whether traders called it too early again.

The advance was “a sign of excessive euphoria,” said Florian Ielpo, the head of macro research at Lombard Odier Asset Management. “Valuations are no longer attractive. Equities should be seen for what they are: expensive.”

US Market Breadth Looks Stretched