A word of caution: Morning Brief

Sam Ro

·Contributor

Updated Mon, Dec 7, 2020, 2:59 AM3 min read

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Monday, December 7, 2020

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Be ready for surprises

There seems to be a healthy dose of optimism in the markets as reflected by stocks continuing to rally to new record highs. At least one top Wall Street strategist has already raised his 2021 target for the S&P 500 (^GSPC).

Last Wednesday, Myles Udland mentioned to me that “all of this has big 2017-into-2018 energy.” Back then during the end of 2017, economic and market indicators were reflecting a heightened sense of certainty.

And once again, some prominent market sentiment indicators reflect a pretty confident investor class. Citi’s Panic/Euphoria Model was “elevated in euphoria territory [last] week, generating a 100% historical probability of down markets in the next 12 months at current level.“ Bank of America’s Sell Side Indicator, which measures Wall Street strategists’ bullishness toward stocks, rose to an 18-month high in November.

“Similar to the end of 2017/beginning of 2018, there appears to be a clear consensus currently in terms of year-ahead trading themes,” JPMorgan’s Nikolaos Panigirtzoglou wrote on Friday. “Unfortunately, the consensus view rarely plays out in its entirety as 2018 reminds us.”

Indeed, 2018 was a year of big market swings including a massive selloff during the first two months.

Coming into 2020, no one was even close to predicting what the markets experienced.

To be clear, we’re not suggesting that investors are destined to once again be blindsided by unforeseen events. But we certainly can’t rule it out.

Market history is riddled with periods of volatility, fueled by risks few could’ve seen coming.

For investors, making money is as much about being positioned for things to go right as it is being prepared in case things go wrong. And if you haven’t already, now’s a pretty good time to put together a plan in case a selloff comes.

By Sam Ro, managing editor. Follow him at @SamRo

What to watch today

Economy

3:00 p.m. ET: Consumer Credit, October ($17.5 billion expected, $16.21 billion in September)

Earnings

4:00 p.m. ET: Sumo Logic (SUMO) is expected to report an adjusted loss of 99 cents per share on revenue of $196.44 million
4:05 p.m. ET: StitchFix (SFIX) is expected to report an adjusted loss of 17 cents per share on revenue of $481.00 million
4:10 p.m. ET: Smartsheet (SMAR) is expected to report an adjusted loss of 21 cents per share on revenue of $94.61 million
4:10 p.m. ET: Coupa Software (COUP) is expected to report adjusted earnings of 3 cents per share on revenue of $124.13 million