After a dismal start to the month, major U.S. stock market indexes bounced the other day before closing in bear market territory and this has spawned all sorts of reports in the mainstream financial media in which analysts and pundits are now hopeful about a big fourth quarter rally. This Bloomberg story is typical of the lot.

Strategists See Biggest S&P 500 Gain Since ’98

Wall Street strategists say the Standard & Poor’s 500 Index, after falling within 1 percent of a bear market this week, will post the biggest fourth-quarter rally in 13 years even after they cut forecasts at a rate exceeded only during the credit crisis.

The benchmark index for U.S. stocks will climb 14 percent from yesterday to end 2011 at 1,300, according to the average estimate of 12 strategists surveyed by Bloomberg. The last time they were this bullish in October was 2008, when the group predicted a 27 percent gain and the index lost 18 percent.

Analysts from Oppenheimer & Co. to UBS AG and Barclays Plc say equities will rebound from a decline of 19 percent since April as policy makers prevent a default by Greece and profit in the S&P 500 climb to $95.85 a share in 2011. Europe’s worsening debt crisis and the U.S. government’s loss of its AAA credit rating led strategists to cut their S&P 500 forecast in the past two months from an average level of 1,401.

“Investors are way too bearish and are being swayed by macro variables,” Brian Belski, the New York-based chief investment strategist at Oppenheimer, wrote in an e-mail on Oct. 4. “Fundamentals drive stocks,” he said. “U.S. portfolios are not positioned for a positive third-quarter earnings season.”

It is very true that sentiment is worse than the underlying economic fundamentals that, so far, are only indicating sluggish growth or a very mild recession, though, after the 2008 experience, it’s understandable that the mood of the stock buying public has soured in advance of any major decline for either the economy or equities.