Investing.com -- Bank of America's Sell Side Indicator (SSI) held steady at 56.7% in November, its highest level since early 2022.
Despite the S&P 500 closing at a fresh all-time high after gaining 5.9% in November, strategists maintained their recommended equity allocations, reflecting cautious optimism amid mixed policy outlooks under the Trump administration, according to BofA.
The SSI, which tracks sell-side strategists' average equity allocation recommendations for balanced funds, remains in "Neutral" territory but is closer to a contrarian "Sell" signal than a "Buy."
Specifically, the indicator is said to be just 1.4 percentage points from the "Sell" threshold compared to 5.4 percentage points from the "Buy" threshold.
Historically, the SSI has served as a reliable contrarian signal, with lower sentiment levels aligning with bullish market conditions and vice versa.
According to BofA analysts, the current level of 56.7% suggests a potential 11% price return for the S&P 500 over the next 12 months, one of the inputs informing the firm's 2025 year-end target of 6666 for the index.
The bank adds that investor sentiment around bonds has declined significantly this year, with the average recommended bond allocation dropping by 2.9 percentage points.
This has reportedly largely benefited equities, which gained 2.0 percentage points in allocations. Bond underperformance, driven by waning foreign demand and rising sovereign risks tied to U.S. debt levels, further supports the case for equities.
"Although equity sentiment and valuation are elevated, we still see ample reason to stick with stocks over bonds for the long term," BofA stated, citing potential annual price returns of 5-6% for the equal-weighted S&P 500 over the next decade, excluding dividends.