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Investing.com -- Wall Street equity sentiment held steady in July, with no signs of excessive optimism, according to Bank of America’s latest Sell Side Indicator (SSI) report.
The equity allocation among strategists ticked up only 10 basis points to 55.7%, maintaining a neutral position and continuing the moderate upward trend seen since the spring.
The SSI a contrarian gauge of equity sentiment, has historically been bullish when Wall Street was bearish, and vice versa.
While currently implying a 12% return for the S&P 500 over the next 12 months, the reading is still below the levels seen at previous bull market peaks—59% in 2000 and 2022, and 64% in 2007.
“The indicator barely budged in July, ticking up by just 10bp to 55.7%,” BofA strategists wrote.
“Strategists held their allocations steady as equities continued to grind higher – concerns around the Aug. 1 deadline for tariffs and elevated valuations weighed against mostly positive takeaways from Q2 earnings,” they added.
Despite the upward trajectory in stocks, BofA does not believe current sentiment reflects broad-based euphoria, noting the recent rally in meme stocks, micro-cap outperformance, and a record rise in risk appetite in its Fund Manager Survey as signs of speculative activity.
Still, equity overweights among institutional investors are still not at extreme levels.
Bond allocations, which had jumped following Liberation Day, have since declined, while cash allocations remain historically low.
BofA continues to prefer large-cap value stocks, viewing them as “a solid hedge against a market correction given large value stocks are under-owned, historically inexpensive, and now higher quality than growth stocks.”
The current reading of 55.7% also sits below the traditional 60–65% equity allocation benchmark for balanced funds. Wall Street, BofA notes, has tended to underweight equities during past bull markets, including those in the 1980s, 1990s, and 2009–2020.
According to BofA, the SSI has demonstrated stronger predictive power for 12-month S&P 500 returns than many other single-factor models. When the indicator is in “neutral” territory—as it is now—the average forward 12-month return for the index has historically been 12.8%.