The fact that equity strategists aren't predicting large advances for the market next year may actually be a bullish sign, says
Wall Street Journal columnist E.S. Browning.
Many strategists forecast gains of 5 percent or less. The S&P 500 index has returned 11.6 percent so far this year.
So why are the moderate estimates a positive indicator?
"It is another sign that investors aren’t yet slipping into the excess optimism that pushed stocks to unsustainable levels before the collapses of 2000 and 2008," Browning writes.
Some others agree.
"If people have expectations that are sensible they aren’t as likely to build investment plans that are infeasible," Seth Masters, chief investment officer at Bernstein Global Wealth Management, told Browning. Masters forecasts a total return of about 7 percent next year.
Market participants' caution "is one of the main reasons we are bullish" on stocks, Savita Subramanian, chief U.S. stock strategist at Bank of America, told Browning.
Some experts are concerned about valuations. The S&P 500's trailing price-earnings ratio totaled 19.27 Friday, up from 18.85 a year ago, according to Birinyi Associates.
But Brian Belski, chief investment strategist at BMO Capital Markets, is quite enthusiastic.
"U.S. markets are 5½ years into a 20-year bull market," he told CNBC. The corporate sector of the economy has seen "massive structural changes" in the last 15 years, he said.
"We've become ultra conservative, we've over-corrected, we've rebuilt our balance sheets, and earnings in America are the most stable asset in the world. Now we're going to take that stability and grow. . . . U.S. stocks are pristine assets."
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