SocGen’s Albert Edwards sees something concerning in equities.

Of course, you could say that every second of every day. To let Albert tell it, catastrophe lurks for stocks around every corner, and the next 40% drawdown’s always imminent.

Let’s pause for a moment to give credit where it’s (probably) due. When it comes to crash callers, Albert’s sufferable because at least he gets his own joke. That, as opposed to, say, a Jeremy Grantham, who takes himself very seriously, and who other people take very seriously too mainly because he’s a billionaire but also because in investing, if nowhere else, broken clocks get credit for being right twice a day.

Being in on (and in a lot of cases, being the biggest purveyor of) his own joke is just one of Edwards’s saving graces. Another is that, as far as I’ve ever been able to tell, he’s a genuinely good guy. I’m not, and can’t imagine being, so to me, that’s a Herculean feat.

Moreover, it’s important to remember that Edwards got the bonds right. Albert was perennially on the right side of a four-decade bond bull which, at the extremes in late 2020, manifested as more than $18 trillion of negative-yielding debt globally.

That probably doesn’t get enough attention. Staying bullish on bonds until yields turn negative is brave on its own. Staying bullish on bonds until the global stock of negative-yielding debt piles nearly $20 trillion tall is about like getting into Bitcoin at $5 and holding all the way up to $100,000. That’s not so much “conviction” and “fortitude” as it is a type of insanity, but… well, hats off, because it was the right call.

Anyway, the point is: Say what you will about Edwards, but he’s affable, he was right on disinflation and his notes stand the test of time as evidenced by the fact that he’s still writing them. On Thursday, he warned that analyst optimism for the Nasdaq 100 is receding. “Analyst optimism” in this case just means the ratio of upgrades to downgrades. As Edwards noted, “the idea is that sell-side analysts have a symbiotic relationship with the companies they follow, so analysts’ optimism quickly reflects a change in direction of the cycle.”

The figure above shows the six-month moving average of that ratio plotted with the YoY change in big-cap US tech.

The problem here — and I’ve been over this repeatedly — is that increasingly, the term “global equities” just means “US mega-caps,” and those mega-caps are just the Nasdaq 100 leadership. So if anything goes wrong for that handful of companies, there’s a kinda/sorta sense in which it’s the end of the world.

That, in turn, is why the DeepSeek shock was so unnerving. The mega-caps are blowing through “many, many billions” (to channel Donald Trump) in capex in an effort to stay abreast of the AI arms race, so if it turns out you can create competitive technology for a few lousy million (with an “m”) that’s an enormous problem for the so-called hyper-scalers. And anything that’s a problem for them is a problem for global equities (because, again, they are “global equities”).

“In highly concentrated markets, such as this one currently, the biggest stocks and the market overall do not historically demonstrate a sustained difference in performance,” Edwards wrote, adding that “without getting into a debate about US valuations, one thing you can certainly say is the World index is dominated by the US and, in turn, the US equity market is dominated by Tech.”

The figure shows the same revisions series, this time using the 12-month moving average, along with the index itself and its 200-day.

“[I]f the decline in analyst optimism for the Nasdaq 100 is anything to go by, the tide is going out fast,” Edwards went on, calling it “a minor macro miracle that the index is still trading above its 200-day moving average let alone record highs.”

So, is a crash imminent? No. Almost surely not. But remember: A broken clock is right twice a day.