Wall Street Is Worried the Bear Market Has ‘Unfinished Business’

-- It was supposed to be one of the greatest stock-market comebacks of all time. But after a summer slump, there’s a nagging fear it might just keep slipping away.Roughly a year after the S&P 500 Index bottomed out, money managers have seen the stock market’s gains erode on expectations the Federal Reserve will keep interest rates elevated well into next year.

If the selling revives and the S&P 500 falls below 4,200, there are few breakout levels where buyers could safely swoop in, according to technical analysts who monitor daily averages and other metrics as a gauge of stock-market momentum. It closed Friday at 4,309. Sam Stovall, chief investment strategist at research firm CFRA, said a retrenchment of that scale remains unlikely and he’s sticking to his 4,575 year-end price target for the S&P 500, implying a further gain of some 6%. But he’s still nursing doubts about how long such strength could persist.

Such concerns have weighed on investor sentiment. A poll of investment advisers from 125 firms by the National Association of Active Investment Managers showed their equity exposure fell to 36% last week, less than it was at this time a year ago. From a contrarian standpoint, that means investors are sitting on a lot of money that could be used to buy equities when sentiment eventually turns around. Although October has a bad reputation for stocks, it’s historically a seasonally better time for investors following the worst two months of the year for equities, according to Stovall.

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