Gold is 2025’s best performer. UBS sees more upside
Investing.com -- Wall Street strategists slashed their equity allocations in April, marking the sharpest monthly cut in three years, according to BofA’s latest Sell Side Indicator (SSI)
The average recommended allocation to equities dropped by 160 basis points to 54.5%, the largest month-on-month (m/m) in three years and a 7th percentile m/m change since 1985, BofA strategists highlighted.
This drop points to a clear reversal in sentiment. The indicator peaked at 57% in January—within one percentage point of triggering a contrarian “Sell” signal—and has now fallen back to levels seen at the start of 2024.
"Following three consecutive months of deteriorating sentiment, our SSI has retraced back to levels we saw at the beginning of 2024," strategists Victoria Roloff and Savita Subramanian said in a note.
BofA uses the SSI as a contrarian gauge of sentiment: when strategist optimism is high, it tends to be a bearish signal for equities, and when pessimism prevails, the odds of a positive surprise increase.
April’s sharp pullback coincided with a 1.3 percentage point increase in recommended bond allocations, even as BofA highlighted “upside risks to interest rates amid growing sovereign risks.”
The SSI now sits firmly in Neutral territory—just 3.2 percentage points above a contrarian Buy signal and 3.4 points below a Sell. At its current level, the model implies a 12-month price return of 14% for the S&P 500, according to BofA.
Strategists’ caution mirrors other signs of market capitulation. BofA cited its latest Fund Manager Survey (FMS), where a record number of investors expressed plans to cut U.S. equity exposure.
In addition, consensus year-end S&P 500 targets have dropped nearly 10%, while 2025 earnings revision breadth has fallen near a record low.
“Soured sentiment provides a more constructive setup for stocks to bounce in the wake of any positive headlines,” the strategists wrote, though they warned of continued volatility.
“We prefer staying active over buying the index, with a tilt toward quality, sectors/stocks exposed to ‘needs’ over ‘wants’, and large cap Value,” they added.