BofA's top indicator projects S&P 500 at 4700 over the next 12 months

Bank of America’s Sell Side Indicator (SSI) fell 9 basis points to 52.9% in January, approaching the lowest level in almost 6 years. SSI tracks the average recommended allocation to stocks by US sell-side strategists.

The reading suggests 16% returns for the S&P 500 over the next 12 months, implying the index could hit 4700. At the moment, SSI is the most bullish of BofA’s six frameworks that are used to come up with a year-end target (4000 for 2023).

“Historically, when the SSI was at these levels or lower, subsequent 12m S&P 500 returns were positive 95% of the time (vs. 81% over the full period) and the median 12m return was +21%,” equity and quant strategist Savita Subramanian wrote in a client note.

SSI nearly hit “Sell” in 2021 before sharply plunging to come just 1.4ppt shy of a “Buy.”

“This shift is one reason for our more constructive outlook into 2023 and since then the S&P 500 is up 6%,” the strategist added.

Subramanian also notes that cash allocations are near the lowest levels in BofA’s data history. The strategist urged clients to “stick with stocks over bonds.”

By Senad Karaahmetovic

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