An index of global seller-side ratings “has returned to peak levels of optimism reached in 2000 and 2007, after which global stocks halved”, wrote in a note the strategists led by Robert Buckland.
While analysts always have more buys than sales, “they seem especially enthusiastic right now”, said the strategists. That has raised a red flag in the “bear market checklist” of citi which, on the other hand, had seen a decrease in warning signs this year as markets have turned lower.
Analysts’ maximum level of optimism comes amid a rally that has seen the S&P 500 rise more than 10% from its June low, even as economic data encourages sentiment. Federal Reserve to further tighten monetary policy to control inflation. According to citithere are “few fears” of an upcoming recession.
By region, analysts in emerging markets and the United States are more optimistic than those in Europe and Japan, the strategists said. By sector, net buy recommendations have risen the most for consumer discretionary and materials stocks over the past 18 months, while information technology, utilities and communication services have grown the least.
Strategists noted that recommendations have historically been more successful by region than by sector. “Overweighting markets where analysts are more bullish has added value” in recent years, he wrote Buckland. “Favoring sectors where analysts are more bullish has not helped performance”.
They also noted that their recommendation rating gave a false sell signal in 2012, when global stocks were little changed the following year.
The strategists of Morgan Stanley Y Goldman Sachs Group Inc. they had already warned that analysts’ expectations are unrealistic, posing a threat to the stock rally. In the meantime, Marko Kolanović of JPMorgan Chase & Co.one of Wall Street’s staunchest bulls, said investors should cut back on stock holdings slightly.