‘Managing drawdown risk is coming to the fore,’ says Jefferies’ Darby
by William Watts
It might be time for investors to check their enthusiasm after buying into prospects for a V-shaped recovery in corporate earnings after the plunge in stock prices as the coronavirus pandemic hit in the second quarter, warned one analyst as stocks struggled to reach new records Tuesday.
“U.S. earnings expectations have certainly ‘V-shaped’ and this has been accompanied by an enormous reversal in risk appetite in almost a minuscule amount of financial time,” said Sean Darby, global head of strategies at Jefferies, in a Tuesday note. “Some of our indicators are beginning to move into the ‘euphoria’ stage, and we caution that managing drawdown risk is coming to the fore.”