Stocks Headed For A Major Leap, Says Morgan Stanley Senior Portfolio Manager: 'You Have To Have Your Head In The Sand To Really Be Bearish'

After a tumultuous cycle in the markets, the S&P 500 is on the brink of a breakout as investor sentiment shifts, according to a senior portfolio manager.

What Happened: Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management, has a bullish outlook for the market, Business Insider reported.

“If you look at history, it is an extraordinarily bullish signal for the market,” Slimmon told CNBC on Wednesday.

He added, “You have to have your head in the sand to really be bearish at this juncture. It means the market is breaking to the upside.”

The S&P 500 is merely 1% shy of its all-time closing high, thanks to a 24% surge this year. The U.S. economy has defied recession forecasts while easing inflation has permitted the Federal Reserve to hint at rate cuts in the coming year.

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This is a stark contrast to 2022, when the index plunged 20%, causing investors to adopt a defensive approach. However, as the year draws to a close, optimism appears to be prevailing, with the latest AAII survey noting a rise in market optimism to its highest level in over two years at 52.9%.

Despite this optimism, Morgan Stanley strategists warn of a potential unexpected recession in 2024.

Why It Matters: A ‘Santa Claus Rally,’ which refers to the market’s tendency to rise during the last five trading days of the year and the first two of the next, contributed to the recent market surge. The Dow Jones Industrial Average and Nasdaq 100 reached historical highs earlier in the week, and this momentum is expected to persist into the following week, according to Bank of America's technical analyst, Stephen Suttmeier.

Meanwhile, Vance Howard, CEO of Howard Capital Management, on Tuesday predicted that long-term bonds may surpass the S&P 500 in 2024, despite recent fluctuations in the bond market. This prediction comes after he observed a 13% increase in the iShares 20+ Year Treasury Bond ETF TLT since early November.

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