The Bank of America Sell Side Indicator (SSI) fell to 54.6% in April after rising over the prior two months, according to the firm in a note Wednesday.
The indicator is BofA's contrarian sentiment barometer, tracking sell-side strategists' average recommended allocation to equities in a balanced fund.
The bearish move in April, which saw a decline in sentiment, was likely influenced by a combination of factors, including a pullback in equities, escalating geopolitical tensions, and concerns over stagflation.
"Strategists moved out of equities and bonds last month but raised allocations to cash – the average cash allocation increased by 82bp, the largest monthly increase since March 2020 peak COVID risk," said BofA.
The indicator, which BofA says has been a reliable contrarian indicator, is now Neutral, which the firm notes is a less predictive range than the more extreme "Buy" or "Sell" thresholds.
"Last month's decline pushed the SSI just below its 15yr average of 54.7%. The indicator is now slightly closer to a contrarian "Buy" signal than a "Sell" (3.3 vs. 3.4ppt)," the firm adds. "The SSI's current level indicates an expected S&P 500 price return of +14% over the next 12m."