The majority, including the gross of hedge funds, is still too pessimistic and underinvested. Many professional investors (fund managers et.al.) are sitting on high cash reserves. I believe that those bears will get again punished by solid economy numbers that lead to stock market gains.
The global economy, especially the U.S. economy, is better than many expect. The majority underestimates the strength of the US consumer spending. I expect that the U.S. consumers, the engine of the global economy (imports), stay optimistic and continue their spending spray encouraged by the healing job market, the recovery of the home prices and gains on the stock market (income effects).
I also believe that the majority underestimates the robust growth of the company profits which is the main motor of the stock market rally. In the recent months U.S. and European companies have proved that they can generate rising earnings thanks to efficiency gains and the ongoing technological progress.
And many companies are sitting on huge cash piles that enable them to finance further stock buy backs and dividend hikes making stocks more attractive.
I further believe that Europe is turning the curve now. Some early indicators (manufacturing indices) are signaling that the European industry is bottoming out. Germany, the largest economy of the region, already reports growing retail sales.
Solid growth in the U.S. and an European recovery in the second half of the year could reaccelerate growth of the still very export dependent Chinese economy which disappointed in the first half of the year.
Hence I expect that the S&P 500 will gain in the coming six months another 10% plus and could close north of 1.800 by the end of the year.