An unexpected (and unexpectedly strong) rally into year end? I believe we'll see one. I'll lay out the bull case.
(a) The global economy continues to grow. Following one of the worst declines in global markets in 2008-9 + another brutal decline in emerging markets in 2014-16, growth has returned in a big way. How do we know? Global companies have been reporting strong earnings!
(b) Maximum frustration-> My sense is that most investors are under-invested and/or waiting for a pullback, and thus a melt-up will result in more pain than a sharp decline.
(c) CAPE reversal. The widely-cited Shiller CAPE (cyclically-adjusted PE ratio) is based on a ten-year average of earnings, and will begin to look far more attractive as 2007-09 earnings begin to fall off the radar. This will provide room for stock prices to climb without having to listen to media noise re an excessively high CAPE ratio. I prefer listening to media noise re Cape Canaveral for the global stock market!
(d) (Speaking of earnings)- Earnings season begins in earnest later this week! I expect a continuation of strong earnings reports, strong enough to fuel a substantial rally.
(e) It's that time of year! October is the month to buy. Technically, the time to buy (for those who sell in May) has traditionally been the end of October. But 2017 has been anything but conventional.