Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Other than Jim Paulsen of Wells Capital, there has probably not been a strategist more bullish (correctly) for the past few years than JPM’s Thomas Lee. I am excluding people like Jeremy Siegel who have been bullish for nearly the past 3 decades straight. Hence it was noteworthy when Lee went bearish just over a month ago, calling for a correction. However this morning the permanent melt up in U.S. (and Japanese) stocks (but not the rest of the world) has caused Lee to throw in the towel on the call. Of course, Lee notes that him throwing in the towel on a correction call is perhaps a good contrary indicator! With that said, there might be no one left in the bear camp other than Doug Kass, Robert Prechter, Tom DeMark (?) and Zerohedge at this point. Of course 2 of those 4 are permanent bears. I saw David Rosenberg essentially give up in the last week as well.
- Plenty of bears have thrown in the towel waiting for a market pullback. Now, one of the market’s biggest bulls is even offering a mea culpa of sorts — that he wasn’t bullish enough. “We capitulate on our ‘correction’ call,” J.P. Morgan strategist Thomas Lee wrote in his Friday note to clients. “A stronger bull market (than anticipated) is underway in 2013.”
- Lee, one of the more optimistic strategists on the Street, started calling for a pullback six weeks ago. At that time he advocated for investors to show some near-term caution and said the S&P 500 would look more compelling if it fell to the 1400-to-1450 range. Such a drop failed to materialize.
- And now he says he’s bullish again because the economy hasn’t slowed as much as previously anticipated. Even though economic data over the past few weeks have been trickling in at a weaker-than-expected pace, including Friday’s retail sales and consumer sentiment data, the market has just “looked through” it, he says.
- The rally has confounded many analysts and investors who have said the market is due for a pullback. Lee says the market has been tracking more closely with a typical fifth year of a bull market, in which the average S&P 500 gain is 19%.
- To be sure, the big concern to Lee changing his thesis now is his timing could be magnificently wrong, especially if the economy and the markets are indeed headed for a spring swoon. Such a development began this month in each of the past three years. Even Lee alluded to this worry. “We believe the biggest risk to our view is that the market begins to correct just as we capitulate on it happening,” Lee says. “That is potential irony. But a negative catalyst has to be strong enough to question the trajectory of the recovery.”
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