Read on Twitter
BofA’s Sell Side Indicator (contrarian sentiment indicator) is now less than 2% away from a “Sell” signal. The last “Sell”(rolling 15-year +1 standard deviation from the rolling 15-year mean) was in Aug ’07 which is now the closest level to this signal since the GFC
- Stocks slipped in January, along with other major asset classes. Historically, a weak January led to weak annual returns.
-Large-cap funds had a tough start to 2021, with only 35% outperforming their benchmarks, the worst start of year since 2016.
-Large-cap funds had a tough start to 2021, with only 35% outperforming their benchmarks, the worst start of year since 2016.
-Growth funds particularly struggled, as mega-cap stocks were among worst performers
- Broad flows into small caps were the 10th largest ever with inflows last week from all 3 client groups (long only/ hedge funds/ retail); BofA see more room to run & are positive on small caps
- Broad flows into small caps were the 10th largest ever with inflows last week from all 3 client groups (long only/ hedge funds/ retail); BofA see more room to run & are positive on small caps
- Wall St strategists increased equity allocations nearly 1% to 58.4% in Jan - this lofty optimistic sentiment has been a reliable contrarian indicator
This week:
- S&P 500 rallied ~4% and closed at an all-time high
-BofA retail clients were big buyers of US equities last week (15th largest ever), with near-record flows into small caps
- S&P 500 rallied ~4% and closed at an all-time high
-BofA retail clients were big buyers of US equities last week (15th largest ever), with near-record flows into small caps
- BofA note “democratization of stocks, euphoric sentiment, rich valuations, and perverse reactions to beats reminds us of 2000”.
Balanced against:
- Stimulus talks continuing, with Democrats pushing for a $1.9T package
- The “There is no alternative” (TINA) argument still in play for now with frameworks suggesting investors begin to start buying back bonds when 10Y yields in 1.75% to 3% range
- Stimulus talks continuing, with Democrats pushing for a $1.9T package
- The “There is no alternative” (TINA) argument still in play for now with frameworks suggesting investors begin to start buying back bonds when 10Y yields in 1.75% to 3% range
Summary:
- Bullish sentiment + lofty valuations vs attractive yield and pro-growth policy leaves BofA neutral: on S&P with year-end target 3800
-clear favourite positioning in small cap (obviously outside S&p)
-continued preference for cyclicals: macro points to capex bottoming
- Bullish sentiment + lofty valuations vs attractive yield and pro-growth policy leaves BofA neutral: on S&P with year-end target 3800
-clear favourite positioning in small cap (obviously outside S&p)
-continued preference for cyclicals: macro points to capex bottoming
