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Albert Edwards warns that refusing analyst optimism for American technical shares can mean problems.
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Historically, the optimism of caring analysts has led to poor performance of the stock market.
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Technical stock capitalization now exceeds DOT-Com bubble levels, making the market vulnerable, he said.
Societe General -Strategist Albert Edwards has long been skeptical that AI shares in the US can live up to the hype around it. Now it seems that stock analysts who cover the technology sector are also starting to become dubious.
In a customer memorandum published on Thursday, the often-bearing earth Edwards published a series of graphs that he thinks should pause investors, because shares remain close to all-time highlights. They show analysts optimism to take care of technical shares that have supported the impressive rally of the market – a development that he said it brings “with a serious risk”.
There are a few here. Firstly, the 12-month advancing average of the percentage of analysts is to upgrade income-per shares forecasts. It has fallen from around 58% to 50% since the beginning of 2024, but the Nasdaq 100 has continued its rise. Historically, Down Rinds in optimism coincided with a dip below the 200-day advancing average of the Nasdaq.
“If the rapid fall in the optimism of analysts for the Nasdaq 100 is something to enter into, the tide goes out quickly,” wrote Edwards. “Indeed, it is a small macro wonder that the index is still acting above its 200 mav, let alone the highlights.”
There has also been a decoupling between the expectations of analysts for income and how good the income has been, with reality behind. Now it seems that expectations to the south are starting to turn when the backlog decreases and falls short.
And estimates for the S&P Composite 1500 have come down for the first time since their chatgpt-driven rebound.
“It is the graph below that investors should really be nervous about,” wrote Edwards. “Notwithstanding the 'blips' of games that are played around reporting rounds, analyst optimism for the S&P 500 has been a series of lower highlights and lower lows. Both the progressive averages of 6 and 12 months are now being lowered.”
Again, Edwards emphasizes, the problem with the expectations of acidification is that the outlook of investors is already in exuberant extremes, and everything that lacks those extremes is a disadvantage.
“In ordinary times this would not be a serious threat to investors of shares, but it is potentially a big risk if we are on a nose-plinous high ratings and optimism.”
There is a look at how fruity the technical sector and US shares have come. Technical shares are now a higher percentage of the market than during the DOT-Com Bubble-Die Edwards is famous for calling and US shares are now an exorbitant 75% of global market capitalization.
