Citigroup’s global sell-side bullish index has returned to its bullish peaks hit in 2000 and 2007, a team led by Citi strategist Robert Buckland wrote in a report on Tuesday (9th), warning: “After those two times, Global stock markets have halved.”
As Wall Street analysts’ optimistic forecasts peaked,S&P 500 IndexIt has rebounded more than 10% from its June lows. On the other hand, better-than-expected non-farm payrolls and other economic data may allow the Federal Reserve to further tighten monetary policy, thereby increasing the risk of recession.
However, Buckland’s team found that analysts don’t seem too worried regarding a recession right now and remain bullish on cyclical industries, suggesting little concern regarding an impending global recession.
The team’s statistics found that on the whole, analysts currently give almost all regions and all industries a buy rating, and warned that analysts often make mistakes at the beginning of a bear market, and they are too optimistic when they should be cautious.
The team said that although analysts began to cut US companies’ performance expectations, the decline in share prices and valuations kept them optimistic, and as performance expectations fell further, they would eventually become more cautious, but this is a slow process.
Citi strategists said that while analysts had more buy ratings than sells, even in a bear market scenario. Analysts seem to be getting more bullish right now as the stock market is rising, but it might also be that “the market is rising because they’ve become more bullish.” Regardless, this bullish analyst frenzy has triggered a “red flag” for Citi.
The team also mentioned that the index gave a false sell signal in 2012, when global equities were largely flat the following year. However, the events of 2000 and 2007 are still worthy of investors’ attention.
Coincidentally, Citigroup is not the only investment bank that reminded investors to pay attention to risks recently. JPMorgan Chase strategist Marko Kolanovic began to advise investors to moderately reduce their holdings of stocks yesterday (8th), and turned their attention to the recent downturn in the commodity sector.
This article does not provide partner reprints
