News

The indicator with a perfect record does not say bottom yet

0
Please log in or register to like posts.

Stocks still have room to fall and investors shouldn’t rule out the chances of a hard landing just yet, Bank of America says. Only 30% of the company’s bull market indicators have been triggered, compared to over 80% in previous market lows. Additionally, a signal with a perfect balance sheet has yet to signal a bottom, according to BofA. Something is loading.

It’s still too early to call a market bottom, and technical indicators are signaling stocks have more downside room — including a signpost that has a perfect track record, according to Bank of America.

Analysts pointed out in a Wednesday note to clients that the so-called rule of 20 dictates that the sum of year-over-year CPI growth and lagging P/E has always been lower. to 20 when the market bottomed out. But right now it sits at 28.5, with a P/E at 20 and the latest CPI showing an 8.5% gain.

Other indicators also suggest that the bottom has not yet been reached.

“Only 30% of our bull market signposts (which occurs before a market low) have been triggered vs. 80%+ in previous market lows, suggesting another pullback is likely,” wrote BofA analysts. BofA Global Search

These additional indicators that usually occur before a market bottom include Fed rate cuts, rising unemployment, the sell indicator that gives a buy signal, and a steepening yield curve, among others.

But the Rule of 20, in particular, is the only data point on BofA’s list that has flashed at every market low since September 1974.

“Outside of inflation falling to 0% or an S&P 500 falling to 2500, a 50% earnings surprise would be needed to satisfy the rule of 20, when the consensus is already forecasting an aggressive growth rate and which we think is unachievable by 8% in 2023”. “, wrote the analysts.

Separately, the combination of falling rates and the equity risk premium since June suggests markets are raising expectations of a soft landing, the note said.

Still, analysts at the bank warned that a Fed-induced hard landing — when rising rates tip the economy into a recession — should not be ruled out prematurely.

‘Untold’ Netflix DocumentaryWhere is Manti Te’o Now After Catfishing Scandal?
Christine Quinn exits 'Selling Sunset' ahead of Season 6

Reactions

0
0
0
0
0
0
Already reacted for this post.

Reactions

Your email address will not be published.

GIF