This is getting serious! We’ve written about this “death of equities” theme before. The strategist at Bank of America Merrill Lynch rolled out some interesting data today regarding the “death of equities.” Despite generally rising prices for the past three years, stocks have gotten very little respect—and now there’s this from an article at CNBC:
For a group notorious for its irrational exuberance at the very worst times, Wall Street strategists have taken a decidedly bearish tack as of late.
In fact, their current consensus allocation to stocks versus bonds and other asset classes makes the group the most bearish since 1997, according to data compiled by Bank of America Merrill Lynch.
This average equity allocation at 49.3 percent is “the first time below 50 in nearly 15 years, suggesting that sell side strategists are now more bearish on equities than they were at any point during the collapse of the tech bubble or the recent financial crisis,” wrote Savita Subramanian, chief U.S. equity and quant strategist for the firm, in a note entitled, “Wall Street Proclaims the Death of Equities.”
I put the fun part in bold. This is the most bearish that strategists have been for 15 years! The best thing about their bearishness, though, is the implication from contrary opinion.
Bank of America’s Subramanian actually has the data that backs up this contrarian view. According to her report, when the indicator has hit levels this low over the last 27 years, total returns for the market have been positive 100 percent of the time, with a median return of more than 30 percent.
It makes perfect sense, given what we know about investor sentiment and subsequent returns. Who knows what will happen this time around—but those odds seem pretty good for stock investors.
Have Equities Kicked the Bucket?
Source: jjchandler.com
