Nomura analyst Masanari Takada earlier this month warned of a “Lehman-like” plunge in the stock marketplace. On Monday, he gave some urgency to that caution.
‘The U.S. Stock market particularly is facing its finest test of the yr.’
Bearish sentiment presently correlated properly with sentiment earlier than the disintegrated funding bank Lehman Brothers in 2008, Takada argues. So investors should put together for the carnage in the stock market because of “panic-selling with the aid of fundamentals-orientated buyers and systematic promoting via fashion-following technical investors.”
Takada told investors in a Monday observe that stock market sentiment hasn’t stepped forward from while he first issued his bearish macro take, which CNBC cites because the most pessimistic on Wall Street.
“The correlation between sentiment then and now stays quite excessive,” Takada stated, referring to the Lehman collapse. “Even the passing risk-on phase after the initial surprise of the yield curve inversion (this month)… And the hazard-off temper that struck on 23 August neatly music the sample recorded in 2008.”
Also of notice, the week earlier than the U.S. Labor Day holiday weekend tends to have low trading volume, which can cause wider swings inside the marketplace.
“The endured liquidation of long positions in equities through trend-chasing investors ought to persuade one worldwide macro hedge fund after some other that now’s the time to start paring longs,” Takada wrote.
Earlier this month, the Dow DJIA, -zero. Forty-seven % suffered its worst day of the year, losing 800 points as the yield-curve inversion triggered a hurry of promoting.
No Lehman-like second for U.S. Stocks SPX, -zero.32% Tuesday; however, they did an opposite course with the blue chips off triple-digits in afternoon trades.