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Strategist concerned that a 'Roaring 20s' scenario is priced in

Ethan Wolff-Mann
·Senior Writer
·3-min read

The Dow Jones Industrial Average (^DJI) and the S&P 500 (^GSPC) are set to have one of the best Novembers ever, and are not far off the all-time highs seen last week. But with the Dow hitting 30,000 on Nov. 24 – an increase of over 10% on the month – and the best month since 1987, some people are getting a little wary of unchecked bullish emotions.

Michael Antonelli, market strategist at Baird Private Wealth Management, sounded the alarm on Yahoo Finance Live Monday morning, pointed out the dangers about the growing consensus that we’re in a “boom.”

In Antonelli’s view, the dominant narrative in the markets goes something like this: When consumers get the vaccine, they’re going to go absolutely wild, going to "a million concerts" and "out to dinner every night" and spending as much as they can.

"Sentiment only works in extremes," Antonelli said. “One of the things I’m worried about next year is the notion of a boom, the notion of a ‘Roaring 20s.’”

Though there are plenty of reasons to be bullish, the Baird strategist said the weighty expectations puts “a little bit of fear into me where I start to think, how am I going to play it if this stuff is already priced in?"

Whatever worries Antonelli has, however, they aren’t enough to cause him to buy downside protection yet. He said he is currently positioned defensively because he sees the potential for an end-of-year rally, but that if everybody’s writing about how amazing things are going to be in January, Antonelli will start bracing for some sort of impact.

November 27th 2020: Record high closings on Wall Street as the S&P 500 stock market index and the NASDAQ Composite index each closed at new record highs while the Dow Jones Industrial Average also posted a modest gain. - File Photo by: zz/STRF/STAR MAX/IPx 2020 7/6/20 Atmosphere in and around Wall Street and The New York Stock Exchange in the Financial District of Lower Manhattan, New York City on July 6, 2020 during the coronavirus pandemic amid the aftermath of protests, demonstrations, riots, vandalism and destruction of property in response to the death of George Floyd who died while being arrested by police officers in Minneapolis, Minnesota on May 25th. Here, The New York Stock Exchange Building. (NYC)
The New York Stock Exchange in the Financial District of Lower Manhattan, New York City on July 6, 2020. (STRF/STAR MAX/IPx)

Antonelli isn’t the only one

Hugh Johnson, CIO and Chair at Hugh Johnson Advisors, shared some of Antonelli’s concerns, telling Yahoo Finance on Monday that the market, by his numbers, appear to be 8.8% overvalued with only 4% upside potential.

“We've moved from what might be called a very rational rise in stock prices to something that's a little bit less than rational,” he said. However, the irrationality isn’t enough to call it a bubble, Johnson added.

“Even though we're slightly overvalued, optimism is not high enough. We don't see a widespread exuberance. We don't see euphoria yet,” he said.

Johnson agreed that earnings will boom in 2021 as coronavirus vaccines are distributed and a measure of normalcy returns. That’s essentially what is being priced in, or as Johnson puts it, “overvalued.”

According to Johnson, the vaccine is going to have “a very significant impact on the U.S. economy in 2021, 2022. It's going to raise everybody's forecast for 2021 and 2022. We're seeing that going on now.”

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Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, personal finance, retail, airlines, and more. Follow him on Twitter @ewolffmann.

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