Wealth Manager - the site for professional investment managers

Register to get unlimited access to 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 Biotech Growth: we will ride out this storm

Biotech Growth: we will ride out this storm

Geoffrey Hsu of Biotech Growth Trust says the sell-off in biotechnology stocks represents a buying opportunity for long-term investors.

Play Sector Spotlight: Kleinwort Benson's Choukeir on UK equities

Sector Spotlight: Kleinwort Benson's Choukeir on UK equities

In our first Sector Spotlight of the year we explore UK equities on the back of the extreme market turbulence in 2016.

Play Picton: the UK property hotspots for rental income

Picton: the UK property hotspots for rental income

Picton Property Income CEO Michael Morris reveals how he is planning to ride the ‘ripple effect’ as UK economic growth spills out from the capital across the country.

Your Business: Cover Star Club

Profile: PortfolioMetrix is on a mission to kill 'Frankenstein' systems

Profile: PortfolioMetrix is on a mission to kill 'Frankenstein' systems

In a buyers’ market for off-the-peg discretionary management, self-funded start-ups begin at an inherent disadvantage

Wealth Manager on Twitter