Since the 2003 Spitzerization of equity research, analysts have issued more accurate recommendations. Now, equity research analysts are more bearish than ever, which might mean... [insert your own conclusion here due to the widely divergent opinions on whether equity research analysts perform any prescriptive function]. Bloomberg provides the details:
Buy recommendations slipped below holds as a percentage of total U.S. stock picks for the first time ever in February, and now trail 45.3 percent to 47.8 percent, according to data Bloomberg began tracking in 1997. Sells have increased to 6.9 percent from 1.9 percent in March 2000.
There is also a record amount of shorting going on as a percentage of shares traded on the NYSE. Is this a result of bearishness, or the hedging of a record number of long bets?
The bearish recommendations of analysts may have some grounding in reality, since analysts can tell us what they really think about a company without stigma. Others are unable to get past the reputation of equity research as almost anti-prescriptive, built on the days when recommendations were banking client fluffers, or at least gaudy vanity mirrors.
Even though analysts in a majority of the 10 firms involved in the 2003 case have issued market beating recommendations in the last 2 years, several insiders think the bearishness of analysts is a sign that the market will continue to surge. A push to a new record would avoid the fate of the S&P the last time the index hit a record high in 2000. The S&P has lost just 0.5% since hitting a record high on June 4.
Wall Street Analysts Proving More Bearish Than Ever [Bloomberg]