US Listed Companies' 'Buy' Investment Recommendation Ratio Hits Highest in 18 Years

[Photo by AP Yonhap News]

[Asia Economy Reporter Park Byung-hee] The proportion of "buy" ratings for U.S.-listed companies is approaching 60%, marking the highest level in 18 years, according to major foreign media reports on the 2nd (local time).

According to Morgan Stanley's data, at the end of last month when the S&P 500 and Nasdaq indices hit record highs, the buy rating ratio for the top 1,000 U.S. companies by market capitalization approached 60%.

This ratio is the highest since the Sarbanes-Oxley Act was enacted on July 30, 2002.

The Sarbanes-Oxley Act was established to strengthen corporate transparency following the accounting fraud scandal of the U.S. energy company Enron in 2001. Before the Sarbanes-Oxley Act was implemented, it was common for U.S. companies to receive favorable investment ratings through solicitations. Between 1999 and 2002, the buy rating ratio for corporate investment opinions exceeded 60% by a wide margin.

However, after the Sarbanes-Oxley Act was enforced, the buy ratio sharply declined.

From 2003 to 2009, the average buy rating ratio remained below 50%, and from 2010 to 2021, the average ratio was slightly above 50%.

But following COVID-19, as the U.S. and global economies recovered from recession faster than expected, investment banks issued a flood of buy ratings for U.S.-listed companies.

The National Bureau of Economic Research (NBER), which officially determines U.S. recessions, reported on the 19th of last month that the recession period after COVID-19 last year lasted only two months, making it the shortest recession in history.

The sharp U.S. economic rebound is also evident in the earnings season results when U.S. companies announce their quarterly earnings. As the Q2 earnings season nears its end, FactSet data shows that the net profit growth rate of companies in the S&P 500 index for Q2 this year exceeds 60%.

However, with expectations that the U.S. economic recovery will slow in the second half of the year, forecasts suggest that the earnings growth rate of U.S. companies will also decelerate.

This content was produced with the assistance of AI translation services.