Playing catch-up to an equity market that’s running away from you can end poorly.

With that in mind, spare a thought for top-down strategists who maintained a bearish view during a stellar first half for stocks. Their position isn’t enviable.

If they stick with fundamentals-based calls for stocks to sell off and the downdraft never materializes, they’ll be even further behind the curve and derided as hopelessly obstinate.

If they turn bullish, the peanut gallery will immediately call it a contrarian indicator — “Stocks are doomed now!” will be the quip. If stocks do indeed fall thereafter, the embarrassment is compounded by the annoying little voices that whisper, “You knew it all along. The selloff was coming. If you’d just waited another month…”

There’s no right answer, but if the disconnect illustrated in the figure below gets much wider, some folks will have to raise targets, in many cases against their better judgment.

The disparity between the average year-end target and spot US equities is around 300 points. To reiterate: You don’t generally want to be looking up at the rally if you’re a strategist who’s been persistently bearish. Clients, assuming they put any figurative or literal stock in what you had to say, might’ve missed some upside.

The good news is that if you’re an ardent bear in a rising market and stocks swoon, you’ll look really smart. If you’re bearish into a “FOMO”-driven melt-up and stocks crash, you’ll look like a veritable genius. You were the voice of reason in a cacophony of irrationality.

But you need that swoon (or that crash), and it’s not obvious where it’s going to come from currently. (Maybe that’s the best bear case of them all.)

Systematic positioning looks stretched+ and you could make the case that after an ongoing grind lower for vol, there’s a “latent avalanche waiting on a skier’s scream” dynamic in play. Again, though, you need a catalyst — something to reverse the correlation crush. Maybe it’s resilient US data and more rate hike premium. Or a sudden deterioration in the data that triggers a recession scare (i.e., the left-tail). Or a right-tail-style squeeze in cyclicals on conviction that a recession has been successfully averted. Or just earnings season.

JPMorgan’s Nikolaos Panigirtzoglou attributed stocks’ outstanding first half to the absence of a US recession, and the run-up in tech shares, which forced in sidelined institutional investors. The resounding H1 rally “creates vulnerabilities for the second half,” he said. “It means if a US recession happens, there would be a rather abrupt market repricing.”

“The market needs a ‘correlation = 1’ vol shock to create a squeeze in such a ‘Goldilocks,’ soft landing, short vol environment,” Nomura’s Charlie McElligott wrote. “This blast of recent US economic data is at least seeing SOFR shorts drive some much needed positive PNL, with rate vol trying to get sticky again on a terminal repricing.”

One issue are the periodic reminders that notwithstanding the “resilient economy” narrative, the US consumer is tiring and manufacturing, at least, is in a recession. Prints like May’s underwhelming real spending figures and an eighth consecutive contractionary ISM headline probably seem foreboding to casual observers, but they help take the edge off for those concerned that uniformly strong data will force the Fed to deliver on June’s hawkish dots. For now, underwhelming macro prints in the US just serve to perpetuate the Goldilocks environment, and can thereby act as vol suppressants, all else equal.

Looking outside the US, Goldman this week noted that “the fraction of countries with large positive surprises in headline inflation has continued to fall, leaving room for more negative surprises.”

Other countries aren’t as insulated on the growth side as the US when it comes to averting a recession, but if inflation continues to reset lower around the world, that too can perpetuate the Goldilocks story.

For what it’s worth, Goldman thinks inflation will probably realize higher than market pricing. Although the bank revised their US core inflation forecasts lower, markets expect “an even lower inflation path,” the bank’s Andrea Ferrario remarked.

So… what? What to say of (or what to say to) Wall Street equity strategists bearing entirely plausible, well-reasoned bear cases in the face of a melt-up as the second half gets going?

If you’re in the camp who thinks the most efficient way to bring down services sector inflation is to engineer a severe equity market correction, you might say, “I hope you’re right.”