Sell Side Indicator: Wall St’s Improving Optimism

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Source: Merrill Lynch/BoA


This is an interesting chart: Improving Wall Street sentiment is still no where near the levels associated with excessive sentiment. Despite the ongoing rally — or perhaps because of it — we are now all the back to the levels enjoyed at the lows in March 2009.

Merrill notes its now up in “ten of the last thirteen months after hitting an all-time low of 43.9 last July, and is now at its highest level since April 2012, when it first flashed a “Buy” signal.

Here is Merrill:

Wall Street’s bearishness is still as bad as it was at the market lows of March 2009. Given the contrarian nature of this indicator, we remain encouraged by Wall Street’s ongoing lack of optimism and the fact that strategists are still recommending that investors significantly underweight equities at 53% vs. a traditional long-term average benchmark weighting of 60-65%. Even though the S&P 500 has risen nearly 20% since sentiment bottomed, history suggests that strong equity returns can last for years after the indicator troughs.

Note that the Sell Side Indicator is based on “average recommended equity allocation of Wall Street strategists as of the last business day of each month.” It has historically been a reliable contrary indicator.


Wall St Optimism Almost Back to March 2009 Levels
Savita Subramanian, Dan Suzuki, Alex Makedon, Jill Carey
Bank of America Merrill Lynch, September 3, 3013

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