2024.04.01 23:23
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Bank of America: US stock market sentiment is far from reaching "frenzy" levels

Bank of America strategist Subramanian stated that the rise in US stocks may boost confidence, with US stock sentiment showing some improvement in March, but far from reaching an exuberant level. Bank of America's "sell-side indicator" is a contrarian sentiment indicator, with extremely exuberant sentiment often signaling market tops

According to the latest report from Savita Subramanian, a strategist at Bank of America, the rise in the US stock market in the last quarter boosted stock investors' confidence to the highest level in nearly two years, but market sentiment has not yet reached the "frenzy" level that typically signals a market top.

Bank of America's "Sell Side Indicator" rose slightly by 22 basis points to 55% in March, the highest level since May 2022. The "Sell Side Indicator" is a contrarian sentiment indicator that tracks the average recommended allocation of balanced fund stocks by Wall Street sell-side strategists. When this indicator is at the same level as or lower than the average recommendation level, there is a 94% chance that stock market returns will be positive in the following 12 months.

Subramanian pointed out that the current indicator value implies that US stocks will rise by at least 13% in the next year. "The rise in US stocks may boost confidence, with US stock sentiment rising in March, but far from reaching euphoric levels."

It is worth noting that there are different views among major Wall Street banks on whether US stock investors are currently at euphoric levels. For example, Citibank's stock indicator shows that sentiment has reached "euphoric" levels.

Bank of America expects that as the Fed cuts interest rates, the cash return rate will drop to 3% within two years, and trillions of dollars in cash in retirement accounts will shift to stocks.

Subramanian stated that the breadth expansion of US stocks may continue. The proportion of stocks outperforming the market in March increased from 40% in the previous month to 60%, the highest level since December last year.

A recent article on the Wall Street News website mentioned that the rise in US stocks is no longer dominated by technology stocks, with market breadth indicators significantly improving and cyclical stocks collectively rising. The "Big Seven" technology stocks saw a gradual halt in their rise in March, with a market cap-weighted increase of only 1.6%, the worst performance since December last year, while cyclical industries performed well, with energy and finance rising nearly 12% in the first quarter.

Wall Street News Website