Investing.com -- Bank of America said in its latest Sell Side Indicator (SSI) note on Wednesday that equity sentiment remains “stubbornly ‘Neutral’” even as the S&P 500 notched a fifth consecutive month of gains in September.
The firm’s Sell Side Indicator, which tracks strategists’ average recommended equity allocations in a balanced portfolio, held steady at 55.5%.
BofA noted that “equity sentiment [is] flat: 55.5% recommended in stocks…which is hardly euphoric.” By comparison, allocations climbed above 70% at the market’s 2000 peak and cleared 65% before the 2007 high.
BofA described the SSI as “a contrarian sentiment signal,” pointing out that it has historically been bullish when Wall Street was extremely bearish, and vice versa.
The current reading leaves the indicator closer to a “Sell” than a “Buy,” sitting “2ppt from ‘Sell’, 4ppt from ‘Buy’.” Despite that, the level still “implies a healthy S&P 500 price return of 13% over the next 12 months,” according to the bank.
The analysts also addressed concerns around lofty valuations. “Along with record high prices, the S&P 500 hit fresh records on a handful of valuation metrics,” they said.
While high multiples often raise skepticism, BofA argued that “valuation is a poor market timing tool in the near term.”
The firm added that today’s price-to-earnings levels are supported by structural factors, including “the index’s shift toward asset-light business models, its higher quality of earnings, and its significantly lower leverage.”
Looking ahead, BofA forecasts that the S&P 500 will rise by about 8% over the next year, supported by “even higher earnings growth.”
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Investing.com -- Bank of America said in its latest Sell Side Indicator (SSI) note on Wednesday that equity sentiment remains “stubbornly ‘Neutral’” even as the S&P 500 notched a fifth consecutive month of gains in September.
The firm’s Sell Side Indicator, which tracks strategists’ average recommended equity allocations in a balanced portfolio, held steady at 55.5%.
BofA noted that “equity sentiment [is] flat: 55.5% recommended in stocks…which is hardly euphoric.” By comparison, allocations climbed above 70% at the market’s 2000 peak and cleared 65% before the 2007 high.
BofA described the SSI as “a contrarian sentiment signal,” pointing out that it has historically been bullish when Wall Street was extremely bearish, and vice versa.
The current reading leaves the indicator closer to a “Sell” than a “Buy,” sitting “2ppt from ‘Sell’, 4ppt from ‘Buy’.” Despite that, the level still “implies a healthy S&P 500 price return of 13% over the next 12 months,” according to the bank.
The analysts also addressed concerns around lofty valuations. “Along with record high prices, the S&P 500 hit fresh records on a handful of valuation metrics,” they said.
While high multiples often raise skepticism, BofA argued that “valuation is a poor market timing tool in the near term.”
The firm added that today’s price-to-earnings levels are supported by structural factors, including “the index’s shift toward asset-light business models, its higher quality of earnings, and its significantly lower leverage.”
Looking ahead, BofA forecasts that the S&P 500 will rise by about 8% over the next year, supported by “even higher earnings growth.”
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