Bank of America's Proprietary Indicator Points To Stock Market Gains

Gene Naumovsky

BOFA's sell-side indicator has fallen, and investors are looking forward to an even greater market rebound.

Bank of America’s sell-side indicator, rooted in Wall Street strategist suggestions on average equity-allocation, fell to 54.9 from 55.2 as the market rebounded, according to Business Insider. Economic history tells investors that the indicator is really saying stocks should report gains in the next year. The proprietary indicator proves to be a pointer to invest when stocks seem to be falling even more.

Head of US equity and quantitative strategy, Savita Subramanian said, “When the sell side indicator has been this low or lower, total returns over the subsequent 12 months have been positive 94% of the time, with median 12-month returns of +20%.” Subramanian sees the S&P 500 at 3,419 over the next year, and the indicator remains one of 5 factors composing that target.

A behavioral transition has made itself evident in the market since the Great Recession, as demand for aggressive equity-allocation never recuperated. Now, opportunities to buy stocks with safe dividend yields at cheap prices are possible, as well as chances to buy quality companies with healthy balance sheets, says Subramanian.

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Economics, Finance and Investing