Stock market today: S&P 500 climbs as health care, tech gain; Nvidia earnings loom
Investing.com -- Equity sentiment among Wall Street strategists ticked up in May, but Bank of America’s (BofA) contrarian indicator remains closer to a “Sell” signal than a “Buy.”
The bank’s Sell Side Indicator (SSI) rose by 56 basis points to 55.1%, recovering part of its sharp drop in April, when sentiment had slumped amid escalating trade tensions.
The SSI tracks the average recommended equity allocation among sell-side strategists. Its current level is now slightly above the 15-year average of 54.6% and remains firmly within “Neutral” territory.
However, BofA strategists noted that the indicator is “slightly closer to a contrarian ‘Sell’ signal than a ‘Buy’ (2.8ppt vs. 3.8ppt).”
Historically, the SSI has been a reliable contrarian signal. When the indicator has been at extremes—either high or low—it has been more predictive of forward market performance. At its current level, the model implies a 13% price return for the S&P 500 over the next 12 months and contributes to BofA’s broader year-end target framework.
The rebound in sentiment in May was supported by easing U.S.-China trade tensions and renewed optimism over the “Big Beautiful Bill,” which helped lift the S&P 500 more than 6%—its best month since November 2023.
Still, BofA emphasized that parts of the market may not have fully priced in potential policy benefits. “Our quant screens of domestic manufacturers and ‘more take-home pay’ beneficiaries are cheap relative to history,” the team wrote.
While the SSI has not yet triggered a formal “Sell” signal, BofA’s historical data shows that such levels tend to be associated with weaker future returns.
Since 1987, when the SSI has been in “Sell” territory, the average subsequent 12-month return for the S&P 500 was just 2.7%, compared to 20.5% in “Buy” territory and 12.8% when neutral.
Despite recent gains in the index, Bank of America maintains a cautious tone, pointing out that Wall Street has often underweighted equities during strong bull markets—including the 1980s, 1990s, and post-2009 rally.