The current market rally tends to be “how bull markets end“, as per Savita Subramanian of Merril Lynch.
Savita Subramanian, an equity and quant strategist of Bank of America Merrill Lynch sees the current market rally as a sign of caution.
As part of an interview given to CNBC on Tuesday, the Wall Street strategist stated “This is kind of how bull markets end…What we’re in right now is this sort of euphoria around stocks that’s been missing for this entire bull market.”
The lack of investor participation in the ongoing run, which began back in 2009, has gotten it labeled as “the most hated bull market in history“.
However, Subramanian feels like a change in the tone is looming. More and more, pro investors are moving their cash over to equities, while investors as a whole are expecting more and more from companies when earning reports are disclosed. Also, those very companies are starting to let share repurchasing slip as stock prices climb higher.
“People are starting to buy the dream that stocks can go up…This is what I worry about. It’s not the age of the bull market, cause bull markets don’t die of old age. It’s just a lot of the things we’re looking at look very late-cycle.”
One of the expert‘s main concerns arises from the reactions investors are showing towards quarterly earnings reports. Up to the current week, 81% of S&P 500‘s companies had outdone their profit expectations for Q3. 73% of them had already done so in the previous quarter. While the stock for those companies would be normally expected to rise, they‘ve shown little to no movement in reaction to their performances.
“There has been no reward for earnings beats, which is a little bit weird. The bar’s getting higher. Investors are expecting good news. When they got good news, it’s already in the stocks.”