Investors are starting to get nervous about the state of the stock exchange, but Citigroup analysts say comparisons with 2008 are bunk.
The market anxiety, however, is certainly justified. The S&P 500 index has pulled back 11 percent since its high this past year, but a few very large resilient companies have helped cushion the blow. A number of other companies have fallen 20 per cent using their 52-week highs – the phrase a bear market.
But for individuals who think another meltdown has started, la 2008, Citi begs to differ.
“The headlines are scary enough with collapsing commodity prices, plunging PMIs and geopolitical uncertainty, but commentary from some well-known equity market participants about another financial crisis like the one experienced in 2008 has added to the fear factor,” said Tobias Levkovich, chief U.S. equity strategist at Citi. ”
“While sentiment is poor both qualitatively and quantitatively, we should push back against the notion that the backdrop for investors is comparable to the problem seen eight years ago.”
Levkovich highlights that certain key distinction between now and then is the Senior Loan Officers’ survey on lending standards, which had collapsed by the end of 2007. In comparison, laptop computer has only slightly retreated in recent months. Another difference is the fact that high-yield bond prices in 2008 crashed striking nearly every company. Previously year, however, rising yields happen to be confined to mostly energy companies experiencing low oil prices.
Sentiment is a third area where situations are completely different. A wave of bullishness swept through stock investors at the begining of 2008, while sentiment today is constantly on the tread near rock bottom, as it did for a lot of 2015, suggesting investors aren’t as complacent because they were leading up to the financial crisis.
“It really is far more challenging to find comparisons than differences,” Levkovich said.