As the US stock market continues to hit new historical highs, Albert Edwards, the global strategist of Societe Generale, one of the few firm short sellers on Wall Street, continues to insist on short selling, believing that the US stock market is reflecting a historic foam, and the crash may be imminent.
The US stock market may be repeating its mistakes
Edwards is one of the few people on Wall Street who foresaw the Internet foam more than 20 years ago. In recent years, he has warned that the US stock market may be in a similar foam, especially when the market is crazy about AI. He had previously warned that this suggests a significant correction in the stock market, especially if the United States falls into an economic recession.
Edwards pointed out that the US stock market has risen significantly in the past year, with the S&P 500 index rising 27% from its low point in October 2022. But Edwards believes that such a strong upward trend may serve as a warning to the Federal Reserve to avoid overly relaxing monetary policy.
Edwards also pointed out that the current craze for AI in the US stock market is very similar to the technology foam more than 20 years ago.
"At present, the focus of the market is on the expectation of the sharp increase in corporate profits driven by artificial intelligence. Market people have been trying to justify the current overvaluation on this basis. But for those of us who have experienced the Internet foam in the late 1990s, we have heard these statements for a long time and will only roll our eyes at the sky," Edwards said in the report.
Market optimism is already decreasing
Investors have linked the bull market in the US stock market to the so-called "artificial intelligence revolution," but Edwards said there are signs that analysts' optimism and corporate profit expectations have begun to cool.
He pointed out that the proportion of companies in the S&P 500 index that have received analysts raising their profit expectations has dropped to less than 50%.
Edwards warns:
"I can only say that analysts' optimism towards the S&P 500 index has already fallen by only 50%, which is not a normal cyclical recovery, let alone the 'new era' of artificial intelligence. Does this weak profit background really match the nearly one-third increase in the S&P 500 index within a year? Perhaps this is just a liquidity issue triggered by the Federal Reserve?"