Ian Harnett

James Mackintosh

My post on the inherent bias towards bullishness among Wall Street’s analyst community prompted an interesting response from Ian Harnett at Absolute Strategy Research.

He agrees in principle that sell-side analysts and strategists tend to be pro-cyclical, raising predictions as the market rises (his London research house is on the sell-side too, it’s worth noting).

But he argues that when analysts refuse to raise their forecasts in line with rising markets, that is a good sign for investors – and that this is exactly what’s happening now. When it happened in 2005-6, the market soared even as analysts became more cautious.

Analyst buy and strong buy as % all European recommendations, vs European market

Source: Absolute Strategy Research

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