JPMorgan analysts led by Marko Kolanovic are undeterred in their defensive model portfolio allocation. If anything, they’re more confident given what they described on Monday as “early signs of exhaustion in the rally.” They cited the pullback in the Nikkei amid yen strength tied to speculation around a BoJ rate hike.

Plainly, caution’s been the wrong call since late-October, even as Marko won plaudits recently for sticking with it in the face of near universal buy-in for the Goldilocks/soft landing narrative driving stocks higher and credit spreads tighter.

On Monday, he reiterated that investors are pricing in “a better-than-Goldilocks outcome.” Positioning’s stretched, conditions are overbought and markets are “priced for perfection as valuations are rich, and extreme crowding in momentum stocks risks a sharp correction in this factor,” he warned.

The figures above show JPMorgan’s proxy for S&P 500 futures positioning (on the left) and reported positions (on the right). The bank also mentioned low short interest in SPY and QQQ as well as stretched momentum signals indicative of elevated CTA exposure.

“We accept that if the immaculate disinflation thesis plays out as expected and major central banks such as the Fed and the ECB begin a rate cut cycle around mid-year in a solid growth backdrop, the current bullish momentum in risk assets is likely to be maintained,” Kolanovic wrote, before cautioning (again) that in JPMorgan’s view, “very elevated equity positioning” suggests an asymmetric risk profile for risk assets in the event the macro environment doesn’t evolve as expected.

Meanwhile, on the other end of the bull-bear spectrum, BofA’s Savita Subramanian addressed a hodgepodge of questions she apparently fielded from clients after raising her S&P target to a Street-high 5,400. Clients, she said in her latest, all expressed some version of the same general inquiry: “Savita, are you forecasting a bubble?”

In short, Subramanian contends it’s not a bubble. “The gap between price and intrinsic value is high based on snapshot PE multiples, but the ex-Magnificent 7 trades closer to long-term average multiples, and, more importantly, today’s index lacks comparability to prior decades’,” she wrote, adding that although historical valuations do matter, “comparing a trailing PE today to a trailing PE of prior decades makes little sense given the index’s mix shift.”

She went on to reiterate several key points from the note which presaged her price target hike. “Companies have been forced to abandon low quality EPS growth (levered buybacks, global cost/tax arbitrage) to focus on efficiency, yielding more predictable margins and warranting a higher multiple,” she said, on the way to describing today’s market as more 1995 than 1999. “US equity sentiment is at almost precisely the same level as in 1995 based on our Sell Side Indicator — neutral, not wildly bullish like 1999 [and] the ERP is at almost the same level as in the mid-90s, and actually went negative by 1999.”

Subramanian then said the productivity promise of AI and automation is “nascent like the PC revolution was in the mid-90s.” In 1999, tech “was valued on price to eyeballs,” she wrote. By contrast, the “earnings contribution and capital discipline of TMT is similar [today] to that of 1995’s Nifty 50.” “Bull markets end with euphoria, and today euphoria has been ring-fenced to themes [and] is nowhere near bullish levels of prior market peaks,” she concluded. “In our view, this bull market has legs.”

Kolanovic isn’t so sure. “While it is unclear whether the recent deceleration is simply a pause in the rally or the start of a pullback, in our view the risk-reward is negatively skewed,” he pressed. “Additionally, we believe that markets are ignoring the substantial geopolitical and political risks given their apparent lack of immediacy.”