Wall Street Optimism Close to Giving First Sell Signal since 2007

The stock market's plethora is close to forecasting a sharp sell-off, Bank of America strategists said on Monday.


Stocks rose sharply on Monday as fears about rising Treasury bond yields gave way to a resurgent risk appetite. Stocks most closely linked to the resumption of economic growth beat expectations, with major indexes nearing record highs. After questions were raised last week about whether the stock could maintain its elevated valuations, Monday's purchases signaled that investors believe so.


According to strategists led by Savita Subramanian, it is this overwhelming bullish activity that can negate the record rally. The Bank of America Sell Side Indicator, which tracks the average recommended share allocation by Wall Street strategists, rose to 59.2 percent from 58.4 percent in February. The indicator is near the highest point in the last ten years and is 1.1 points from the "sell" warning.


The last time such a signal was given was in June 2007. The yield on average was negative 13% year-on-year for several years after the "sell" threshold was last crossed, strategists said in a note.


So far, the indicator is in "neutral" territory, but increased optimism suggests a muted yield of the stock market over the next 12 months. The indicator forecasts a yield of just 7% over the next year, less than half the average forecast of 16% since the Great Recession.


Rising Treasury bond yields and higher valuations also suggest stocks are poised for a decline, the team said. While yields fell from a peak of 1.614% last week, a rise to 1.75% would mark a "tipping point" for asset dispensers to transfer cash from stocks to bonds. And stretched stock price multipliers point to below-average yields of 5%, according to the bank.


Those who still plan to stay in the market should bet on sectors "tied to the real economy," strategists say. Cyclical, low-cap stocks and stocks are more likely to outperform as the economy resumes. Conversely, stocks should be avoided, which led to growth last year, the team added.

02 March, 2021

Read more:

Elon Musk Says Bitcoin Is Not Decentralized

17 May, 2021

German central bank tests blockchain solution to counter CBDC

26 March, 2021

Bank of America considers DeFi "potentially more disruptive than bitcoin"

19 March, 2021

Apple could grow another 25% by adding cryptocurrencies to its Wallet app

09 February, 2021

Legendary venture capitalist Bill Gurley wants to ban the order flow practices that underpin Robinhood

02 February, 2021

Tesla will climb 8% to an all-time high of $ 900 as stock rallies help boost fundraising.

12 January, 2021

Global Stocks Rise After UK Travel Rules Eased

29 December, 2020

Three trend reversals that will define the market in early 2021

22 December, 2020

Modest market return in 2021 could disappoint worried investors

15 December, 2020

One stock market valuation indicator reached the highest point

08 December, 2020

Sino Biopharm Shares Down 14% In Hong Kong

01 December, 2020

Goldman Sachs Group Inc. plans to create a European stock trading platform

24 November, 2020

Encouraging results from Moderna vaccine trials have renewed hope in the tourism sector. #INDU

17 November, 2020

Oil prices fall on the eve of progress in the creation of the Covid-19 vaccine

10 November, 2020

US equities rose on Monday

03 November, 2020

Asia will be resistant to the second wave of coronavirus.

28 October, 2020

Oil prices fall for the fourth day

20 October, 2020

Arrange a call