At the end of August 1999, Charles Clough, then the chief investment strategist of Merrill Lynch, which was the most bearish on US stocks in Wall Street at the time, resigned. A few months later, the internet bubble began to burst. Marko Kolanovic, the chief market strategist of JPMorgan, who was steadfast in his bearish view on US stocks, recently resigned, causing many Wall Street insiders to worry about whether this round of US stock rallies is going to peak.
Last week, Marko Kolanovic, the chief market strategist at JPMorgan, announced his resignation. This expert, who was regarded as the 'best reverse indicator of US stocks' and who perfectly failed to capitalize on the surging market over the past year, leaving, may not be good news for US stock bulls.
In Shakespeare's play The Tempest, there is a famous line, 'What's past is prologue.' In the eyes of some people on Wall Street, this quote applies to the matter of Kolanvovic's departure. The media pointed out that Kolanvovic's departure after working at JPMorgan for 19 years reminded many traders, bankers, and analysts of Charles Clough, the former chief investment strategist at Merrill Lynch, who resigned nearly 25 years ago.
On August 27, 1999, Charles Clough, the most bearish analyst of US stocks on Wall Street at that time, resigned. Although his views had once been highly respected, he had made a big mistake in predicting the trend of US stocks and maintained a pessimistic attitude even as the stock market continued to rise. From the beginning of 1995 to the end of the 20th century, the S&P 500 index soared by 220%. The coincidence is that Kolanvovic also misjudged the trend in recent years when US stocks were surging.
When the S&P 500 index hit a new high at the beginning of 2022, Kolanovic was bullish all the way and advised clients to significantly increase their holdings of US stocks. As a result, the S&P fell from January to October, losing nearly 20% cumulatively. He began to be bearish on US stocks at the end of September 2022 and advised clients to reduce their holdings of US stocks. The S&P, however, began to rise from its lowest point in October of that year and has since risen by more than 50%, perfectly illustrating what is known as the 'best reverse indicator of US stocks.'
Until the news of his resignation, Kolanovic and some JPMorgan strategists still insisted on being bearish on US stocks. Two weeks ago, they released a report reiterating their bearish stance, predicting that the S&P would fall by nearly 25% by the end of the year, and emphasizing the 'terrible' phenomenon of the lack of breadth in the US stock market.
Some commentators believe that Clough resigned during the peak of the dot-com bubble. Six months after he resigned, the dot-com bubble burst in March 2000. On April 3 of that year, the Nasdaq index suffered its largest point drop at the time and has since fallen all the way until the end of 2001, with a market cap depreciation of more than half, only returning to its 2000 high in 2015. Some investors now speculate whether the recent resignation of Kolanovic, the famous bearish analyst on Wall Street, heralds the top of this surge in US stocks.
Moreover, the media pointed out that Kolanovic is not the only bearish heavyweight who is retiring. A few months ago, another person who was famous for incorrectly predicting a sharp drop in US stocks, Mike Wilson, chairman of the Global Investment Committee at Morgan Stanley, retired after ten years with the bank, and since then, he has become less skeptical of the rise in US stocks.
David Rosenberg, founder and president of Rosenberg Research, who was an economist at Merrill Lynch and accurately predicted the problems the US economy might face before the global financial crisis broke out, commented that Kolanvovic's departure is likely to be one of the signs of the market top.
Last week, media reports indicated that Kolanovic's departure was likely due to the series of misjudgments he made during his tenure. Rosenberg believes that this is an old tradition on Wall Street in many ways. If you go against the trend in a bull market, your clients and employers will increasingly become dissatisfied with you.
Edited by Jeffrey