The text discusses the need for stock analysts to change their ratings from sell to hold due to an imbalance in coverage between large, liquid stocks and emerging blue-chip opportunities.

Recent reforms in Europe's independent research sector could bring about a significant change, although concerns persist about a potential L-shaped recovery without further regulatory support.

The economics of equity research are complex, with funding traditionally coming from commissions on trades. However, the UK and Europe have expressed concerns about this system, citing conflicts of interest and inflated costs for clients.

In response, the MiFID II regulation was implemented in 2018, requiring separate payment for research services. While this reform aimed to increase transparency, it has had unintended consequences.

Major brokers have engaged in price competition, offering research as a standalone product, leading fund managers to absorb costs rather than passing them on to clients. As a result, overall spending on research has significantly decreased, raising concerns about the future quality and availability of independent analysis in the market.