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Spencer Platt

Wall Street strategists are apparently sticking to their bullish views. According to Bloomberg News (via Crossing Wall Street) strategists, on average, see the S&P 500 rallying to 1,300 by the end of the year. As of Wednesday's close, that implies a 14 per cent gain, which would mark the biggest fourth quarter rally in 13 years.

The S&P 500 has rallied for three straight days, lifting the broad index a total of 7.5 per cent – just three days after crossing a threshold into bear market territory. It's hard to pinpoint the source of the recent switch to optimism, although European authorities have been sounding a tad more diligent this week about proposing solutions to the debt crisis. This could be nothing more than a rebound based on the vague hope that stocks have bottomed out amid a selloff that overstated the risks.

The Bloomberg article quotes Brian Belski, the chief investment strategist at Oppenheimer: "Investors are way too bearish and are being swayed by macro variables," he said in an email. "Fundamentals drive stocks. U.S. portfolios are not positioned for a positive third-quarter earnings season."

He may be right. But then again, Wall Street strategists are scrambling to cut their year-end targets to reflect the bear-market dive this summer, suggesting that they are starting to modify their enthusiasm for stocks. Just two months ago, the average year-end target stood at a lofty 1400, before getting hacked by more than 7 per cent.

What's more, Bloomberg also points out that strategist bullishness doesn't necessarily translate into bullish markets: "The last time they were this bullish in October was 2008, when the group predicted a 27 per cent gain and the index lost 18 per cent," the article stated.

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