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yesterday in a note that the santa claus rally has begun right on cue so you think we're going to have a nice little ramp between now and the end of the year that's intact yes yeah i think and i think fed chairman's comments yesterday really sort of underscored that there's a lot of reasons for risk on to happen including you know momentum the seasonals i i also think covet in a way is also stabilizing it and with the vaccine so a lot of reasons to expect at least 3 800 probably higher before you're in okay so that's at least two percent or so of of where we are from now let's look ahead if we could because you have a very interesting perspective on 2021 almost a tale of two years right you have a first half scenario and then a second half in the first half which i find really interesting you say even though you're so optimistic that stocks are going to have a 10 correction sometime in the first part of the year maybe february to april why um the market's got a pretty big overbought condition to work off i don't think it's going to be an issue into your end and i don't think it's really an issue in january and i'm not necessarily worried about all the good things that could happen next year but given the overbought situation and if you look at other bull markets usually by that 12th month you have a pretty angry and painful correction so we think that starts in february april and that would take us to 3 500.
i would be buying that fullback but i do want people to understand it's going to make 2021 feel really difficult yeah but you have one heck of a backloaded jump coming next year if you're right you say the s p should rally 25 in the second half of 2021 to 4 300. uh that is pretty optimistic a boom some would say yeah uh you know first of all i think an economic boom should follow um if anyone's looking at china that's a template i mean china is going absolute gangbusters and we know there's a lot of pent-up demand and on top of that i think we're going to be looking at two conditions that really add hugely to risk risk on or equity risk premium falling one is the volatility should be dropping you know we averaged the third highest level vix in the history of the vix in 2020.
every time you've had that elevated red vix it drops it's pretty steadily over the next three years i mean i think we're talking sub 15 vix within two years and the second is negative real rates are going to be minus six percent next year that's a real incentive to be acquiring real assets and that's historically been very good for cyclical stocks so i think that that triple combination takes us to at least 4 300 on the s p probably higher all right we'll get back to you know where you think we should play this and and how let's bring in the committee though farmer jim i'm bringing you in first okay because you've been of late one of the more bullish committee members that we've had yet you're only looking for a six percent return next year jim which frankly surprises me well let me explain it because i i am far more bullish than a six percent return that return is a price return projection on the s p 500 you can add a couple of percentage points and dividend to get to eight percent but scott i know i don't need to tell you you'll tell me i have a strong value tilt and what tom lee was just saying is what i believe i think that you're going to see the classic early stage of an economic expansion that favors cyclical stocks i think that the rotation you've seen over the last three months is for real you know there's been some discussion about financials just as an example of of uh of value stocks and how can they possibly do well in the current environment you have to remember the stock market looks forward a good six months and what it sees is loan losses that are a heck of a lot lower than what's been reserved possibly higher interest rates but also the fed probably six months from now is going to green light bye bye bye excuse me share buybacks this is just one aspect of the value trade so the s p 500 may be up about 8 in total return next year and you may say that's tepid but for me as a stock picker i'm really looking forward to a return that's much better than the s p 500 not just because of the value overweight but because i also agree with tom that you are going to get a correction i happen to think it's in january just using historical precedent but that's something that i'm going to try to trade around hopefully i get that right i could have a nice low teens year next year and if that happened that would be a great year
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