Still, it doesn’t look like the beginning of a major sell-off, Filia admitted. “There are also true Goldilocks scenarios where the market could be right in being where they are today. But I’m still a bit skeptical,” he said. A so-called Goldilocks market is an environment that is running neither too hot or too cold.
“I think valuations are ignored by the current markets, and the markets do it at their own peril,” he added.
Filia’s outlook is nonetheless far from universal. Many investors continue to celebrate the ongoing bull run, with banks like Morgan Stanley confidently calling for 3,000 points on the S&P 500 index in 2018 as part of a “late cycle euphoria stage.”
Morgan Stanley expects continued earnings-per-share growth over the next 12 months as more sectors see benefits from the U.S. tax bill. Earnings-per-share is an important metric used by traders to gauge the value of a stock.
“Because the tax cuts occurred earlier and are larger than we expected, it is more likely the S&P 500 will reach our bull case of 3,000 before it’s over,” the bank said in a research note Tuesday, though did not make any calls beyond 2018.
Bank of America Chief Equity Strategist Stephen Suttmeier similarly predicts further stock market gains ahead. He pointed to a breakout in the advance-decline line for the S&P 500, which tracks the 15 most heavily traded stocks by share volume, as providing a technical case for a rally through 2018. “The bottom line is this: It’s a big money indicator, and last year this big money indicator didn’t confirm the rally until it broke out in December of 2017,” Suttmeier told CNBC’s “Futures Now” last week.
The S&P 500 is still on track for its best month since March 2016, the Nasdaq is on pace for its best month since July 2016, and the Dow is having its best month since last February. The 30-company index crossed 26,000 for first time on Tuesday.
