Add Sell-Side Stock Analysts to the List of Experts Caught Out by Trump's Rise

Unloved stocks outperform analysts' favorites.

U.S. Stocks Edge Towards Record, What's Next?

Pundits. Pollsters. The Democratic Party. Even gold bugs.

The list of experts with egg on their faces after the ascendance of President-elect Donald Trump extends to many who ply their trade on Wall Street.

The rally in risk assets since the election has f̶o̶r̶c̶e̶d̶ prompted a bevy of strategists to pull an about-face on what will happen to markets as the Trump era dawns. And now it's time to add sell-side stock pickers to the list of experts repudiated by the real-estate mogul's rise.

It's clear that investors' perspectives on the market and macroeconomic backdrop have radically changed since Nov. 8. And that dynamic is only reinforced by the yawning gap in performance between analysts' favorite stocks and those they don't care much for since the election.  

Bespoke Investment Group took a look at the tails of the sell-side distribution, and observed that S&P 500 stocks that are recommended by less than 20 percent of analysts have rallied far more than those that are buy-rated by at least 80 percent of analysts.

The unloved
Source: Bloomberg

"It looks like analysts were caught off guard by the election just as much as investors were," the team writes.

Nonetheless, Bespoke says that analysts retain enough influence to magnify the gap between these winners and losers in the near term.

The team highlighted a group of stocks beloved by analysts that has come under pressure since the election and seem vulnerable to a wave of downgrades that would help foster further underperformance, as well as a list of stocks largely shunned by the sell-side that have outperformed and are due for a re-rating that could drive them even higher.

BESPOK A
Source: Bloomberg

But whether it be top-down or bottom-up, fundamental analysis has proven to be an exercise in futility as of late.

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