Strategists hold steady with stocks at an all-time high
Equity sentiment unchanged post-election The Sell Side Indicator (SSI) is our contrarian sentiment signal that tracks sell side strategists’ average recommended allocation to equities in a balanced fund. The indicator was unchanged at 56.7% in November, remaining at its highest level since early 2022. Strategists held their allocations steady despite the S&P 500 posting its best month of the year in November (+5.9%), closing at a fresh all-time high. The pause in sell side equity sentiment post-election may reflect a mixed perception of policy impacts under Trump 2.0, with greater inflation and rates uncertainty weighing against optimism around de-regulation, lower taxes and pro-growth policy. “Neutral” signal, but closer to “Sell” than “Buy” The SSI has been a reliable contrarian indicator. In other words, it has been bullish when Wall Street was extremely bearish and vice versa.
Our indicator remains in “Neutral” territory but is much closer to a contrarian “Sell” signal than a “Buy” (1.4ppt vs. 5.4ppt). Its current level of 56.7% suggests a price return of 11% for the S&P 500 over the next 12 months, one of five inputs we used to launch our 2025 year-end target of 6666. Stick with stocks > bonds Bond sentiment soured this year amid massive underperformance, with the S&P 500 leading long-term treasuries by nearly 30ppt YTD. The average recommended bond allocation fell by 2.9ppt, largely to the benefit of equities (+2.0ppt). Although equity sentiment and valuation are currently elevated, we still see ample reason to stick with stocks over bonds for the long-term. For the equalweighted S&P 500, valuation points to healthy price returns of 5-6% per year over the next decade (and more with dividends). Meanwhile, treasuries face waning foreign demand and growing sovereign risk as US debt/GDP continues to rise.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!