Investor optimism on Wall Street is on the rise, as reflected in Bank of America’s Sell Side Indicator (SSI), which climbed 50 basis points to 56.7% in October, marking its highest level in over two and a half years.
This contrarian sentiment gauge indicates a notable increase in equity allocations among sell-side strategists, coinciding with a 38% rally in the S&P 500 over the past year.
Despite this bullish trend, the SSI remains in neutral territory, just 1.4 percentage points shy of a contrarian Sell signal, suggesting caution for future gains.
The uptick in equity allocations appears to have come at the expense of bonds, which declined by 3.1 percentage points. Factors such as near-record passive equity inflows and decreasing mutual fund cash levels point to growing investor enthusiasm.
However, Bank of America advises caution, suggesting that high sentiment could limit overall market upside. They recommend that investors remain selective, focusing on “unloved” sectors such as large-cap value stocks, high-dividend payers, and cyclicals, where individual stock risks are high and correlations are low.
