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Deutsche Bank strategist hasn’t seen investors agree this much in 25 years

Ethan Wolff-Mann
·Senior Writer
·3 min read

With the massive coronavirus vaccination campaign underway, the market is feeling bullish. The S&P 500 index (^GSPC) continues to climb near all-time highs and 2021 outlooks are sanguine.

This has given some strategists — even bullish ones — a bit of pause.

Deutsche Bank strategist Jim Reid wrote in a note to clients Monday that a key takeaway for the market in 2021 is that this risk-friendly, U.S. equities-heavy approach is “extremely consensus for the next 12 months.”

The consensus felt so extreme that Reid wondered if this bullish case for 2021 S&P forecasts was the “biggest consensus in history.”

“It’s fair to say that in the 25 years I’ve been doing this I can’t remember a time when so few (if any) disputed the central narrative,” Reid wrote. “Is this a warning sign or a reflection that the vaccine news has been uniformly positive and game-changing over the last 5 weeks?”

In the last Deutsche Bank monthly survey of over 900 market professionals, 48% of respondents said they thought the stocks in both the U.S. and Europe would be higher in three months. This is as bullish as it was last month, Deutsche Bank strategists, led by Reid, wrote. The 12-month expectation was the second-most bullish of the year, also at 48%. The growth in the market has not converted many bulls to bears.

Short interest in the S&P 500 has fallen to the lowest amount in two decades. (Morgan Stanley/Bloomberg)
Short interest in the S&P 500 has fallen to the lowest amount in two decades. (Morgan Stanley/Bloomberg)

This big question of “what does this consensus mean” was shared by Baird Private Wealth strategist Michael Antonelli, who told Yahoo Finance that he was scratching his head at the consensus: “One of the things I’m worried about next year is the notion of a boom, the notion of a ‘Roaring 20s,’” he said.

The weighty expectations put “a little bit of fear into me where I start to think, how am I going to play it if this stuff is already priced in?," Antonelli said.

So what are these skeptics doing with this information? Not much it seems. Antonelli said he wasn’t buying any downside protection — staying bullish even with the self-aware caveat that the uniformity surrounding opinion is unfamiliar.

A “chart of the week” from Morgan Stanley sent to clients on Monday showed that the short interest in the S&P 500 had fallen to the lowest level in two decades, a number that “points to investor complacency,” analysts wrote. “With credible vaccines in view, investors have become exuberant.”

Hugh Johnson, CIO and Chair at Hugh Johnson Advisors, told Yahoo Finance this month that while he thought the market was a little overvalued, he specifically did not see "widespread exuberance.”

Another strategist, Capital Wealth Planning chief investment officer Jeff Saut, also told Yahoo Finance recently the market was “definitely ahead of itself, and “could use a pause.” But like Johnson, he said it still made sense to be bullish, especially in the long term.

“Secular bull markets tend to last 18 to 20 years,” Saut said. “I think people are way too cautious here. I think people are underinvested.”


Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, personal finance, retail, airlines, and more. Follow him on Twitter @ewolffmann.

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