Markets were mixed on Monday.
The S&P 500 rose 0. percent and the STOXX Europe 600 rose 0.7 percent but the Nikkei 225 fell 0.6 percent.
“Earnings growth, especially revenue growth, continues to support U.S. equities,” said Diane Jaffee, senior portfolio manager at TCW.
Similarly, Robert Doll, chief equity strategist at Nuveen Asset Management LLC, said in his weekly outlook that “the two most important drivers of equity markets — corporate earnings and real growth levels — still support a risk-on investment stance”.
European stocks rose despite the collapse of talks to form a coalition government in Germany, with the DAX 30 closing with a 0.5 percent gain after being down 0.5 percent earlier in the session.
Indeed, Michael Santoli at CNBC wrote that “bears may have missed their last chance to feast on 2017's stock market”.
“Beginning this week, seasonal tendencies start turning in favor of stocks,” he said. “As long as the published projections of 11 percent further profit gains hold up for the first half next year and don't start seeming to need the help of a big, immediate tax-cut effect, it's tough to see the market failing in a dramatic way.”
However, strategists at investment bank Societe Generale think that investors are too optimistic.
Alain Bokobza, head of global asset allocation at Societe Generale, said that “investors continue to push asset prices, volatility and leverage to historical extremes” but that “a low volatility carry environment with rather extreme positioning is a dangerous combination, which we recently likened to dancing on the rim of a volcano”.
Bokobza expects “to enter a bear equity market environment” and for the S&P 500 to fall 22.5 percent from its Monday levels to 2,000 by the end of 2019.
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