You’ve got ‘your head in the sand’ to be bearish in this market, as investors move to greed from fear, Morgan Stanley portfolio manager says

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  • You’ve got “your head in the sand” if you’re bearish in this market, a Morgan Stanley portfolio manager said.

  • Markets are moving from their fear stage to greed stage, Andrew Slimmon told CNBC.

  • “If you look at history, it is an extraordinarily bullish signal for the market.”

After all the wild moves markets have made in the past couple of years, the S&P 500 is nearly back where it was at the start of 2021.

But stocks are poised for a breakout as investors recover from their whiplash and switch gears, according to Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management, who pointed to improving breadth in market gains.

“If you look at history, it is an extraordinarily bullish signal for the market,” he told CNBC on Wednesday. “You have to have your head in the sand to really be bearish at this juncture. It means the market is breaking to the upside.”

The S&P 500 is less than 1% away from its all-time closing high after soaring 24% this year, as the US economy defied expectations for a recession while cooling inflation allowed the Federal Reserve to signal a pivot to rate cuts next year.

That marked a sharp turnaround from 2022, when the benchmark index tumbled 20% and sent investors into a defensive stance.

But market bulls are definitely outnumbering the bears right now as stocks look towards ending the year strong. The latest AAII survey showed that market optimism rose to its highest level over two and a half years at 52.9%, with bearish sentiment notching 20.9%.

“We came into this year with overwhelmingly negative consensus,” Slimmon said. “And so it’s entirely consistent with what we’ve seen in the past.

When stocks hit a low, investors begin selling, and as the tides shift, they jump back into the market to “play catch up,” he explained.

One way to see that playing out in stocks right now is how the equal-weighted S&P index has been lagging behind the cap-weighted index — which means that most stocks are still behind the Magnificent Seven stocks that account for most gains this year.

Meanwhile, others on Wall Street are so bullish that some have predicted stocks and the economy are poised for another “Roaring 20s” era.

Still, strategists at Morgan Stanley recently warned that the US economy could still be in for a surprise recession in 2024, though the Wall Street consensus has shifted to a soft landing.

Read the original article on Business Insider

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