David Rosenberg, founder of Rosenberg Research, has warned investors that despite the continuous rise in the US stock market, the imbalance in the market is sending out dangerous signals.
Compared to the dismal state of the Chinese stock market, the US stock market experienced another fruitful week on Friday (March 3), with the Nasdaq index surging and the S&P 500 index reaching a historic high. However, David Rosenberg, former Chief North American Economist at Merrill Lynch, poured cold water on the situation, reminding investors that the current upward trend is not sustainable.
Rosenberg pointed out that although the US stock index is rising, the number of declining stocks last week was “more than twice the number of advancing stocks,” which he sees as a dangerous warning. Looking back at history, the last time this situation occurred was on October 20, 1987, the day after “Black Monday.”
Rosenberg also noted that most of the stocks contributing to the market’s upward trend are from the so-called “Big Seven” of the US stock market, such as Apple, Microsoft, Tesla, and Nvidia.
Another US analyst also stated that the “Big Seven” alone accounted for 45% of the S&P 500 index’s return in January, creating a sense of déjà vu of the “dot-com bubble” for investors.
Furthermore, Rosenberg pointed out that the high stock valuations also imply a decrease in the return on investment that investors can expect from the stock market.
Lastly, amidst the optimistic expectations in the market regarding the Federal Reserve’s rate cuts this year, Rosenberg reminded investors to be cautious.
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