A Federal Reserve pause, seasonal tailwinds, an earnings-led rally. Many of the reasons that got Wall Street strategists increasingly bullish coming into the end of the year now look like wishful thinking.

As Israel’s war with Hamas escalates, souring traders’ risk appetites and dragging the S&P 500 Index into a correction, some mainstay equity optimists are scaling back their positive views on what the final months of 2023 will bring.

Oppenheimer & Co.’s  John Stoltzfus, a long-time stock market bull, lowered his year-end forecast for the US equity benchmark to 4,400 from 4,900, previously the highest among forecasters tracked by Bloomberg. While he remains positive on stocks, he says there’s not enough time in the year for the index to reach his previously projected level as geopolitical risk and interest-rate worries afflict equities.

At Ed Yardeni’s eponymous shop, he also says it’s improbable the S&P 500 will recoup the 10% drop from its July peak before 2023 is out, a change from his view in August and September that the index could see a big rebound.

“We still think that a Santa Claus rally is possible. But between now and Thanksgiving, it’s easier to see downside than upside for the stock market given the unsettling developments in the Middle East and jitteriness in the bond market,” the Yardeni Research founder said in a note to clients on Monday.

A flurry of Wall Street prognosticators ramped up their outlooks for US equities from June through September after failing to call a big rally that shaped markets in the first part of the year. Strategists at heavyweights including Bank of America Corp., the Goldman Sachs Group Inc., and Citigroup Inc. were all among those who lifted their forecasts.

Just as they got excited, the advance began to falter — and hopes of a dip-buying frenzy in the final few months of the year are beginning to look far-fetched as geopolitical fears and interest-rate worries cloud a solid earnings season.

On the other hand, ultra bears like Morgan Stanley’s Mike Wilson and JPMorgan Chase & Co.’s Marko Kolanovic are starting to look vindicated after their pessimism failed to play out for much of the year. Wilson, who once again topped Institutional Investor’s ranking of portfolio strategists, wrote on Monday that the chances of a fourth quarter rally have “fallen considerably.”

“Narrowing breadth, cautious factor leadership, falling earnings revisions and fading consumer and business confidence tell a different story than the consensus, which sees a rally into year-end,” according to his weekly note.

With just two full trading months left of 2023, the S&P 500 is now about 5% below the average Wall Street year-end target of 4,370. That marks a big reversal from this past summer, when the US stock gauge eclipsed the consensus call by the most since September 2020.

Investors face a series of big hurdles to overcome this week before any clearer sign emerges on the market’s direction. The US Treasury’s borrowing plans, the Federal Reserve’s November rate decision, Fed Chair Jerome Powell’s subsequent remarks, and earnings from bellwether Apple Inc. might all move stocks — all against the backdrop of an intensifying war in Gaza.

Despite Stoltzfus’s downwardly revising his outlook to reflect the market’s declines over the past three months, he remains positive on stocks more broadly citing “plentiful” jobs, resilience in corporate earnings, and the Fed being “remarkably sensitive” in proceeding on rate increases.

“This is a tantrum,” Stoltzfus said by phone. “Wait until you see our target for next year.”

This article was provided by Bloomberg News.