Wall Street strategists are more bearish on stocks than they were at the March 2009 lows.
So it’s time to buy.
On Friday, the S&P 500 again made a new all-time closing high, but according to Bank of America Merrill Lynch’s Sell Side Indicator, Wall Street is signaling that is still time to buy stocks.
BAML’s Sell Side Indicator is based on the average recommended equity allocation of Wall Street strategists as of the last business day of each month and the firm has, “found that Wall Street’s consensus equity allocation has historically been a reliable contrary indicator.”
In a note to clients Monday morning, BAML’s Savita Subramanian and the equity strategy team at the firm write that, “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 52% vs. a traditional long-term average benchmark weighting of 60-65%.”
Subramanian writes that when the Indicator has been this low or lower, total returns over the next 12 months have been positive 96% of the team, with median returns of 26%.
Here’s the latest chart of the Sell Side Indicator.