Analyst Bullish Sentiment Rises to Highest Level Since Summer 1987
Nashnova编辑部
SocGen strategist Albert Edwards flags that US analyst earnings optimism has reached its highest level since the summer of 1987 — the very summer that preceded October's dramatic market crash.
How extreme is this level of optimism?
Excluding post-recession recovery phases, analysts have almost never been this bullish on earnings, according to Edwards' data.
This means → today's optimism is not "healthy confidence in a bull run" — it is a historic outlier, and the last time the reading was this high is itself a warning sign.
In plain terms = the analyst community's earnings expectations are at a once-in-decades extreme.
Why does China's credit impulse matter for US earnings?
Among three chart sets Edwards highlights, the core warning signal is a sharp decline in China's credit impulse.
Historical data show Chinese monetary growth leads, and US corporate earnings momentum follows — a significant lead-lag relationship.
This means → when China's credit impulse — a measure of how fast new lending is accelerating or decelerating — contracts sharply, US earnings pressure tends to surface within months.
What else does China's credit contraction hit?
Large swings in China's credit impulse move in close sync with the US ISM manufacturing index — a monthly gauge of factory-sector health — and broader cyclical assets.
This reflects China's credit cycle acting as a lead metronome for global manufacturing and risk assets.
In plain terms = when China opens the taps, cyclical assets rally worldwide; when China tightens, those assets come under pressure.
What happens if the optimism reverses?
US equity returns are ultimately driven by corporate profits. SocGen data show returns and analyst earnings optimism track each other closely over time.
Edwards argues that an imminent reversal in earnings optimism would be a major warning signal.
This means → the risk is not whether analysts are right or wrong — it is that when everyone is on the same side, a turn triggers a stampede far larger than expected.
What does the 1987 reference point tell us?
The historical parallel for today's bullishness — the summer of 1987 — was followed just months later by October's sharp market correction.
Edwards stops short of a near-term forecast, but the historical coordinate alone warrants attention.
In plain terms = he is not calling an imminent crash — he is saying: the last time everyone was this optimistic, it ended badly, and that coincidence deserves serious consideration.
Content is for reference only, not financial advice.