On the matter of groupthink
Gluskin Sheff chief economist David Rosenberg makes a lucid point in his Wednesday report (our emphasis):
It does appear that we have some groupthink to consider —virtually everyone at this stage is now bullish on the market.This could mean that we are not going to get a lot more buying power to propel this equity rally over the near-term as it means that we have a lot of good news priced into the market. As an example, a CNBC poll released yesterday showed that 90% of Wall Street economists believe the recession has ended. It is highly unlikely that 90% of the economics community can be right on the same thing at the same time.
Meanwhile, with regards to the recent rally, Rosenberg suspects a great portion of it can be attributed to short squeezes — a factor that could now be easing. As he states:
One source of major buying power that may take a bit of a respite is short-covering. Indeed, short interest plunged 10.8% in the second half of July; the comparable statistic on the Nasdaq also fell a sizeable 5.1% — in just two weeks, but two weeks in which this short squeeze managed to push the S&P 500 up by a whopping 9%.