Recently, Bank of America’s Savita Subramanian discussed why the market could drop to 3800. She discussed her thesis in her latest strategy note titled “Five Reasons To Curb Your Enthusiasm.”
This analysis is interesting, particularly when analysts are rushing to upgrade both economic and earnings estimates.
What Subramanian questions, and something we have asked previously, is all the “good news” already “priced in?”
“Amid increasingly euphoric sentiment, lofty valuations, and peak stimulus, we continue to believe the market has overly priced in the good news. We remain bullish the economy but not the S&P 500. Our technical model, 12-month Price Momentum, has recently turned bearish amid extreme returns over the past year.”
With investors “all in,” we suspect a correction is more likely than not.