Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

Albert Edwards: 'I can hear the hissing of the stock market bubble bursting'

Albert Edwards: 'I can hear the hissing of the stock market bubble bursting'

SocGen’s Albert Edwards says the ‘share buyback party’ that has been driving the stock market is over and he can hear the ‘hissing’ of the stock market bubble starting to burst.

In his latest research note, the well known bear, pointed out that the level of share buy backs fell by 20% in the second quarter, compared to the first three months of the year, and warned of the new threat of a ‘gargantuan’ funding gap emerging.

‘Companies themselves have been the only substantive buyers of equity, but the most recent data suggests that this party is over and as profits also stall out, the equity market is now running on fumes,’ Edwards said.

He said that the companies have been issuing cheap debt to help fuel the share buyback binge, which has seen them reinvest this money in expensive equity.

‘The equity bubble has disguised the mountain of net debt piling up on US corporate balance sheets. This is hitting home now QE has ended. The end of the buyback bonanza may well prove to be decisive for this bubble,’ Edwards said.

'Is that a hissing I can hear?'

Nancy Curtin, chief investment officer at Close Brothers Asset Management, said that the strengthening US economic data will support company earnings and will ‘underpin the long-term outlook for US equities’.

Meanwhile, Raymond James’s chief investment strategist noted that volumes are currently very thin and said that while many indicators suggest US equities are overbought, ‘indicators can stay overbought for a while’.

Of the S&P’s record high Saut said: ‘It would not surprise me to see some weakness now that the milestone has been reached. Still, even if 2,000 doesn't hold, there are few indications at the moment that there is significant trouble ahead. So, for now, party like it's 1999, when we celebrated both 1,300 and 1,400 giving way.’

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Sam Vecht: the best opportunities in frontier markets

Sam Vecht: the best opportunities in frontier markets

Blackrock's Vecht evaluates frontier markets and explains where he sees the opportunities

Play Where A-rated Pattullo is finding the best bond opportunities

Where A-rated Pattullo is finding the best bond opportunities

Henderson Global Investors head of retail fixed income explains how he is managing his fund against the surprise current monetary policy divergence.

1 Comment Play Taxicab Tenner: Allianz Global Investors' AA-rated Simon Gergel

Taxicab Tenner: Allianz Global Investors' AA-rated Simon Gergel

Our much anticpated new series is here! We hand a black cab driver a tenner and grill the manager of the 125-year Merchants trust until the meter runs out.    

Your Business: Cover Star Club

Profile: meet the duo at the heart of Hargreave Hale's succession plan

Profile: meet the duo at the heart of Hargreave Hale's succession plan

For the first time in the company's history a non-Hargreave is now at the head of the north west broker and asset manager

Wealth Manager on Twitter