Analyst ‘buy’ ratings are at a nearly 20-year high as bullish sentiment sweeps markets

A man sits on the Wall street bull near the New York Stock Exchange
A man sits on the Wall street bull near the New York Stock Exchange Spencer Platt/Getty Images
  • Bullish analyst sentiment is at an 18-year high, a report in the FT says.
  • Passage of the 2002 Sarbanes-Oxley Act required analysts to disclose potential conflicts of interest.
  • Before 2002, the percent of buy ratings was under 50%. Buy signals now make up around 60% of all ratings.
  • See more stories on Insider’s business page.

Bullish sentiment among Wall Street analysts is at a nearly two-decade high as equities markets continue to soar, according to Morgan Stanley data compiled by the Financial Times.

The data covers the largest 1,000 US-listed stocks and shows “buy” ratings at levels not seen since 2002, when US law was amended to crack down on conflicts of interest for securities analysts.

Passage of the 2002 Sarbanes-Oxley Act required analysts to disclose potential conflicts of interest and gave the SEC more latitude to go after conflicted analysts. Before the law, investment bank analysts often were incentivized to issue positive ratings for companies whose stocks their bank was underwriting.

In the post-2002 era, the percent of buy ratings floated south of 50%. After the financial crisis, that aggregate measure was slightly above 50%, according to the FT.

By contrast, buy signals now make up around 60% of all ratings.

The data come as markets continue to pierce new all-time highs, leading some to wonder whether US equities are overbought. In July, BlackRock, the world’s largest asset manager, downgraded US equities from overweight to neutral – pivoting instead to European stocks, which they saw as having much more room to grow.

However, US stock markets’ new highs have been underpinned by robust corporate profits. Firms listed by S&P are set to announce more than 60% year-on-year earnings growth in the second quarter, according to FactSet data cited by the FT.