The bull market continues to command respect. Many investors are now giving it up, some more grudgingly than others. Starting with the S & P 500’s 20% gain for the year, a record high of more than one week, the index survived almost unscathed through the supposedly terrifying month of September. Then there’s the progress made in the third quarter without super-cap tech leadership — the equity-weighted S&P 500 is up nearly 9% since June 30 and the Nasdaq 100 is up less than 2%. And note how the tape quickly scrutinized the Federal Reserve’s half-point interest rate this month as a de-facto de-aging treatment that was seen as an extension of the elderly population. In the eight trading sessions since then, the market has refused to reverse that assessment. Since the Fed’s decision, data on unemployment claims and consumer confidence have been confirming, while data revisions have increased the previous estimates of GDP, personal income and the domestic savings rate of previous areas, indicating that the economy has never been close to the speed as it is popular. Long-term Treasury yields have risen significantly since the Fed’s departure, the 10-year from 3.62% to 3.75%, both in line with historical deflationary patterns and reflecting an easing of macroeconomic fears. Friday’s positive PCE report blessed the market’s conclusion that inflation is slowing while also blessing the rationale for the Fed’s rate cut for “quiet easing.” .SPX YTD mountain S & P 500 YTD Oh, then the Chinese government fired off a series of stimulus measures last week that stunned the skeptical trading community, sent China and China stocks flying and painted a new reality where funds and monetary authorities in the world’s two largest economies are spurring growth. . This is at a time when credit markets are very tight and business profits are rising. Scott Chronert, market strategist at Citi, summed it up: “Markets have reacted positively to the Fed’s rebalancing policy on inflation…However, near-term risks may come from volatility in the Fed’s approach and S&P 500 fundamentals. Earnings growth this year is likely to be in the double-to-single-digit range, which is usually consistent with the Fed holding tighter positions in line with the Fed fund approach that has historically helped keep rates high and generally less of a concern.” This is when this accumulation of good things leads, inevitably, to the market thinking about all of this and the absolute and absolute value of the soft landing that the Fed is working to maintain. Excessive amount? The burden of proof rests squarely with the bears, and they will likely build their case on the argument that current prices leave little room for bad news, raising the market’s risk to yet another “growth scare” or anything else that might exist. come on. New money in the S & P 500 today pays an average of 21.6 times earnings over the next 12 months, which is lower than the 21.8 at the previous market peak in mid-July which is open to a few sharp pullbacks and rotations. except for the mega-cap tech leaders. The idea that the overvaluation of all of the Magnificent Seven giants is completely wrong, some 493 stocks as a group remain more than 18 times. Of course, valuations mean little about the stock market’s fortunes months or so into the future, and most pressures tend to hit hard with Fed easing and higher wages. However, the initial price has something to say about long-term returns and the market’s ability to absorb bad news. Goldman Sachs here plots the S & P 500 forward P/E at the time of each first rate cut in the cycle. We are now even higher than the cut of the year 2000. That example only serves as a guide if the investment-bubble-bubble and recession will soon begin. Note the sunniest predecessor – the soft landing of 1995, which is still played out as a version of the best case result from here – had stocks cheap by 12 times. That’s not to say the market can’t continue to improve from here, although it’s hard to pencil in the 24% annual return investors collected in the five years after the ’95 cut. Bears may also point out that it was the first week of the past two months where that growth took off, surrounding weak ISM manufacturing and underwhelming employment data. Both of those data series are expected next week. But can the market commit to a similar move for the third month in a row with so little fear, as selling them doesn’t look smart in retrospect and after the Fed opens its first easing move? Time to breathe? Of course, a breather would make sense for the broader market, with the S & P 500 up 11 in the past 15 days. Although the sentiment is not positive at all, retail investors are fully exposed to the stock and bullish option prices are once again starting to dominate the flow. Internal fluctuations have been sending a message of great friendliness – consumer cyclicals, banking and industrial performance. Yet Nvidia’s erratic performance, including three straight months of declines since peaking in June, and a general lack of global growth leadership can make the tape volatile and prone to misfires. That the CBOE S&P 500 Volatility Index rose 1.6 points to 17 on Friday with the S&P 500 dead flat and most stocks higher could reflect broader global discomfort or the fact that the US election is pulling within the VIX’s 30- date view window. In any case, it is a significant deviation from the placid energy story told by the S & P 500 itself. John Kolovos, chief technical market strategist at Macro Risk Advisors, is sticking to his call for the S & P 500 to run above 6000, up 4-5% from here, although the caution overlay has his attention, too. “The biggest concern here is that there is still a sense of fear to prevent escape velocity,” he said. “Bitcoin’s stay below $70,000 is just one example of muted risk appetite. The historical tendency for volatility to rise to extreme levels in elections is headache-inducing. Basically, volatility needs to break for people to let the hounds loose.” It’s not that muted expectations and pent-up risk appetites are a negative effect on the market’s trajectory. The average Wall Street strategy target for the S & P 500 is now well below the index’s current level, which is not usually something one sees in a bullish market.