Deutsche Bank may have gotten the corporate bond QE from the ECB that it so desired (even if it means another drop in negative rates) even if that did not help its stock rebound anywhere near to pre-crash levels, and its economist department may be gripped by a bout of raging schizhophrenia as erstwile permabull Joa LaVorgna is now one of the market's bigger bears contrasted with super optimistic DB strategist Torsten Slok (who is seemingly unaware of what his year end bonus was) but that doesn't prevent the bank from having a very outlook of where the market will be come the November general election, namely "range bound between 1925 to 2100."
Here is the latest outlook from DB's strategist David Bianco
We expect the S&P 500 to be range bound between 1925 to 2100 until after the US general election. We do not expect the S&P to fall back into correction territory as a double-dip correction already happened and it would likely take clear signs of an impending US recession or a new global shock to cause renewed investor panic.
While April into May is usually a strong period for S&P 500 performance, we think upside is capped given that 1Q S&P EPS will be down y/y and likely sequentially, Fed speak is likely to be more hawkish especially upon further market gains, Brexit vote risk, and the usual summer softness especially given Presidential campaign headline and geopolitical risks.
We are more comfortable that the dollar will not surge nea -term given the Fed lowered its 2016-2017 rate forecasts and the ECB and others acknowledge the limited benefits of negative interest rates and currency devaluation. However, we do not expect the dollar to fall as nothing like the Plaza Accord of 1985 has occurred. Moreover, we doubt a strong rebound in commodity prices.
If the S&P 500 doesn’t reach a new low, then Feb 11 2016 marks the trough of this market correction. During this double dip correction, S&P was sold off -14.2% from May 21 2015 to Feb 11 2016 (183 trading days). It has been 28 trading days since the market trough, this compares to 119 average trading days between 5%+ S&P dips since 1960. This is supportive, but summer and fall are often weaker than usual in election years.
* * *
What is unsaid is that if DB's forecast is just a little too optimistic, and if stocks indeed proceed to tumble, guess which European bank will be scrambling to get a bailout by a very unhappy German taxpayer...