“We will get into the punchline from Albert Edwards’ latest missive shortly, but first we wanted to share his view on analyst sentiment, and how it relates to the US economy:
If you enjoy the content at iBankCoin, please follow us on TwitterRegular readers will know that we have always followed analyst optimism closely (optimism here defined as the percentage of analysts EPS forecast changes that are upgrades). We have shown previously that it is not the level of analyst optimism that is important for the equity market, but the change in optimism (see right-hand chart below). Somewhat surprisingly we have found that the change in analyst optimism tends to be a very good leading indicator of economic activity (it mirrors almost exactly the OECD and Conference Board leading indicators), but it is published on a far more timely basis, and more importantly it is not subject to revision in the way the economic data and leading indicators are.”
