This is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
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Over time, stocks usually go up.
But the long arc of market history is not the reason Wall Street strategists and analysts are more often than not taking the bullish side of the argument when it comes to companies, sectors, and indexes.
Rather, it is because the audience that Wall Street research teams try to reach first gets paid to be invested.
"Unfortunately, the 'yeah-but bears' will likely continue to morph their narrative to fit their cause," BMO Capital's chief investment strategist Brian Belski wrote on Monday. "As investment strategists, our job is to invest — period."
Like many of his peers on the Street, Belski expects stocks to continue their rally in 2024 with the S&P 500 reaching 5,100.
Belski continued: "Why does the bearish narrative continue to rely so heavily on formulaic, quantitative, backward-looking macro and academic postures? The simple answer is their incessant need to make 'market calls only' and prove that the market is wrong when it is exhibiting positive performance."
Investing happens constantly. Portfolio managers have mandates, which determine what kinds of assets, and in what proportions, investors can expect PMs to deploy with their capital.
Some funds will have narrow mandates; others will be broad. But these PMs do not raise capital to let it sit in a bank account — investors can do that on their own. Investor capital is raised to be deployed.
This point might seem so obvious as to be not worth stating, but Belski raising the issue makes clear that even in the world of professional asset management, people need to be reminded about what investors do, which is invest.
And investing is happening all the time.
Other market participants — columnists, pundits, newsletter writers, former Fed officials now offering advisory services, and so forth — often don't have these same constraints. Rather, these folks are incentivized to make market calls (and then be booked to discuss them during media appearances or speaking engagements) rather than investment recommendations.
Market calls are discrete events; investment decisions are iterative problem sets.
A subtle, but significant, distinction.
Putting capital to work at a regular cadence while following a (sometimes strict) set of rules has practical challenges that strategists and analysts help investors try to overcome. And saying that something will happen in the future rarely helps solve the problem of putting client money to work in line with a mandate today.
As an investment strategist, of course, you want to have good ideas rather than bad ones. But as we argued a few weeks ago, you must have ideas. Which, as Belski notes, are not the same as predictions.
Against this backdrop, then, it is little wonder why Wall Street strategists and analysts are usually bullish.
And likely to stay that way.
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