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(Spencer Platt/2008 Getty Images)
(Spencer Platt/2008 Getty Images)

Wall Street sees BIG rally ahead Add to ...

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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