© Reuters. Any “bad” news could cause a 10% drop in this market – analyst
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Sevens Market Research believes any “bad” news in the current environment could cause a 10% drop in this market. The firm explained its view in its latest Sevens Report note on Monday.
Sevens acknowledged the fact that the stock rally since October makes sense, with the Fed expected to cut rates, yields falling sharply allowing multiple expansion, and inflation continuing to (slightly) decline while growth has remained resilient.
“However, if we look at the facts, analysts cannot help but feel as though this relentless rally has gone far beyond either actual improvement in the fundamentals and reasonable expectations of continued improvement,” argues the research firm.
At 22x earnings, Sevens believes the market is pricing in perfection.
“While there’s absolutely been positive motion since October, analysts urge investors to view 5,100 in the S&P 500 as enjoyable, but extremely vulnerable to a sudden, potentially violent, reversal if the proverbial ‘music’ stops in this game of financial musical chairs,” they added.
“At this point, with markets this stretched near term, analysts can’t help but worry any ‘bad’ news could cause a 10% drop in this market a lot easier than any ‘good’ news could cause a 10% rally,” said Sevens.
Source: Investing.com
