Stock Market Sentiment Has Deteriorated Since The Lows Of The Global Financial Crisis

The Bank of America reported that stock allocations by Wall Street strategists have plummeted to levels not seen even during the worst of the 2008 financial crisis, with the average level plummeting to the lowest since 1995.

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As long as history is any guide, a person would be wise to take advantage of that fear and turn it into a tremendous buying opportunity.

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As a result of Bank of America's "Sell-Side Indicator", stocks are down to 52.7% of the investment portfolios as of this writing. As a result, the S&P 500 hit a low in March 2009, just as the longest bull market run ever began, with the share of stocks at 53.1% in March 2009, which is lower than the 55%-58% range in late 2008 after Lehman Brothers' collapse, and 53.1% in March 2009.

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In the bank's survey, which is based on the data collected from the members of the professional investors' group, the proportion of assets allocated to fixed-income securities has increased substantially as investors fear the onset of another financial crisis, while also fearing that a recession may follow a Federal Reserve rate hike.

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However, when fears about stocks have reached this point in time, it often implies that a rally will be on its way shortly.

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According to Savita Subramanian, BofA's chief of U.S. equity and quantitative strategy, Savita Subramanian wrote in a client note Monday that the rapid drop in sentiment since 2021 demonstrates that there are good reasons to be worried about stocks, and positive surprises are more likely than negative surprises.

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Based on historical performance, it can be stated that when the SSI has been around its current level for the last 12 months, the expected price returns over the next 12 months will be 16%. Similarly, when the gauge has been near its current level or lower, the returns are 96% positive and the median return over the next 12 months is 22%.

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Despite the fact that Subramanian said cash allocations were up to 3.2%, that is close to a record low despite the firm belief that cash yields are better than bonds in the long run. However, despite being pessimistic about stocks in the short term, the firm still believes that equities are a better alternative over the long run.

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The Wall Street research firm holds that equities should be underweighted through the entire bull market of the 1980s and 1990s as well as the bull market from 2009 to 2020,” Subramanian pointed out.