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 The S&P 500 <.SPX> is up 13.3 percent from an intraday low hit on
Oct. 15, and the gains since then have been broad. Since that
bottom, all but 23 S&P 500 components are higher.
The magnitude of the rally has some concerned. Several notable fund
managers at this week's Reuters Investment Outlook Summit said they
don't expect stocks to do much in 2015.
Citigroup on Thursday wrote that the market was "on the edge of
euphoria ... causing us to be more cautious," while Goldman Sachs on
Wednesday released its 2015 year-end target of 2,100 - just 1.8
percent above current levels.
The recent stretch of solid earnings and economic figures, however,
leaves managers puzzled over what could hurt the market going
forward.
"It's tough for me to wrap my head around the next big move being
lower," said David Lebovitz, global market strategist at J.P. Morgan
Funds in New York. "Some people aren't comfortable with current
levels, but fundamentals remain strong."
The market's recent gains prompted a notable commentary from the
Federal Reserve Bank of San Francisco on Nov. 13 that pointed out
certain valuation metrics look stretched. It also noted that the
ratio of NYSE margin debt to GDP in September stood at an elevated
level that, in the past, was "followed by major downturns in stock
prices."
Jim McDonald, chief investment strategist at Chicago-based Northern
Trust Asset Management, wasn't buying it. He said the level of
margin debt is "more or less consistent with the trend line over the
past 20-plus years," though a pullback was possible.
"The primary issue facing the market is that we've gotten a year's
return out of the S&P in the past month," he said. "Investors are
more than willing to take risk off the table after such a big run."
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Volatility may pick up next week as many take off for Thanksgiving.
Markets are closed on Thursday and will close early on Friday.
However, December has historically been the best month of the year
for the S&P, according to the Stock Trader's Almanac, averaging a
rise of 1.7 percent.
Energy names have jumped sharply since the October low, which could
make them liable to profit taking, especially going into the
Organization of the Petroleum Exporting Countries' Nov. 27 meeting,
when members will consider whether to cut output to shore up prices.
Chesapeake Energy <CHK.N>, Newfield Exploration <NFX.N>, CONSOL
Energy <CNX.N> and Marathon Petroleum Corp <MPC.N> have all gained
more than 20 percent since the market's October low.
(Editing by Nick Zieminski)
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