This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe
Wednesday, January 4, 2023
Today's newsletter is by Julie Hyman, anchor and correspondent at Yahoo Finance. Follow Julie on Twitter @juleshyman. Read this and more market news on the go with Yahoo Finance App.
It's a market truism that feels like an old "Seinfeld" episode: Investor sentiment is so bad, it must be good.
That is, when everyone thinks stocks will keep going down, sometimes it's a contrarian indicator they might be set to go up.
And sentiment is certainly lousy right now.
While most strategists don't think the S&P 500 will have another down year, they are forecasting anemic returns in 2023. Many economists are predicting a recession. Meanwhile, consumers are confronted with decelerating but still-high inflation.
But in a report out Monday, strategists at Bank of America Global Research note the firm's "sell-side indicator" suggests all of the above could make today an attractive moment to buy stocks.
The measure, which tracks strategists' recommended allocation to U.S. stocks, is the closest it's been to flashing a clear "buy" signal since late 2017.
"Wall Street is bearish. This is bullish," wrote Bank of America's team led by Savita Subramanian. "Wall Street's consensus equity allocation has been a reliable contrarian indicator over time. In other words, it has been a bullish signal when Wall Street strategists were extremely bearish, and vice versa."
According to BofA, at current levels its "sell-side indicator" suggests an expected price return for the S&P 500 of 16% over the 12 months. Historically, when the indicator was at current levels or below, stocks were higher a year later 95% of the time.
Another sentiment measure closely watched by Wall Street is the American Association of Individual Investors' weekly survey. The survey's latest reading for the week ended December 28 showed some 47.6% of investors were bearish, well above the historical average of 31%.
And this, too, is a pretty good contrarian indicator. The AAII survey reached its most recent bullish high for the week ended January 5, 2022. Indeed, stocks hit highs for the year right out of the gate.
The survey's most bearish recent reading was 60.9% for the week ended September 21, 2022. The S&P 500's low for the year was reached on October 12.
Of course, there are can be even more sophisticated sentiment indicators professional technicians use to judge the market's most likely next move. (We're getting into real Jared Blikre territory here.)
Jonathan Krinsky, chief market technician at BTIG, for example, thinks the AAII survey isn't telling the full story, and suggests there are signs recent selling hasn't totally worn out investors. Which leaves more potential downside on the table.
“While AAII sentiment remains bearish, [investors'] stock allocation ticked up in November to 62.35%,” Krinsky wrote in a recent note. "Retail investors continue to 'talk bearish, but act bullish.' This suggests we have yet to see full capitulation."
On Tuesday, stocks opened 2023 with losses.
Economy
7:00 a.m. ET: MBA Mortgage Applications, week ended Dec. 30
10:00 a.m. ET: ISM Manufacturing, December (48.5 expected, 49.0 during prior month)
10:00 a.m. ET: ISM Employment, December (48.4 during prior month)
10:00 a.m. ET: ISM New Orders, December (47.2 during prior month)
10:00 a.m. ET: ISM Prices Paid, December (42.9 expected, 43.0 during prior month)
10:00 a.m. ET: JOLTS Job Openings, November (10.050 million expected, 10.334 during prior month)
2:00 a.m. ET: FOMC Meeting Minutes, Dec. 14
Wards Total Vehicle Sales, December (13.40 million, 14.14 during prior month)
Earnings
UniFirst Corporation (UNF)
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app for Apple or Android
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube
More than 500 Cuban immigrants have come ashore in the Florida Keys since the weekend, the latest in a large and increasing number who are fleeing the communist island and stretching thin U.S. border agencies both on land and at sea. It is a dangerous 100-mile (160-kilometer) trip in often rickety boats — unknown thousands having perished over the years — but more Cubans are taking the risk amid deepening and compounding political and economic crises at home. The Coast Guard tries to interdict Cuban migrants at sea and return them.
Republican Rep. Kevin McCarthy lost a fifth vote for speaker of the House, as GOP opposition blocked him on the second day of Congress.
Climate experts say that trends like global warming are measured in decades, and that one day's data can't prove any sort of climate pattern.
Inside Field Trip Health’s New York City clinic, the vibe is less doctor’s office, more tranquil spa.
Candidates for speaker are nominated from the floor by members of their parties. The speaker who is chosen does not have to be a member of Congress.
The Republicans opposing Rep. Kevin McCarthy's bid to become the next House speaker generally have made their mark as part of the GOP's ultra-conservative wing, eager to pick a fight with leaders from both parties and rarely finding major bipartisan bills to be a good thing. Most are members of the House Freedom Caucus, a hard-right group that also had strained relationships with former House speakers John Boehner and Paul Ryan. The McCarthy holdouts say they want more opportunities to amend bills and have extended debate, and they want to restore the ability of any lawmaker to force a vote on whether to remove the future speaker, which they argue creates accountability.
Rishi Sunak has told cash-strapped hospitals not to go back to the days of Covid by cancelling operations.
Another sell-off lurks in Tesla's stock, warns one veteran analyst.
McConnell hailed a $1.6 billion bridge project for Kentucky and Ohio a legislative miracle.' Biden said it proves "we can work together."
If ever there was an heir to the intellectual legacy of Pope Emeritus Benedict XVI, it's Cardinal Gerhard Mueller. Benedict gave his fellow German theologian his old job — prefect of the Vatican’s doctrine office. “Of course, he took his furniture with him, but the whole thing breathes the spirit of Joseph Ratzinger,” Mueller said in an interview with The Associated Press on Wednesday, the eve of Benedict’s funeral.
The National Weather Service in the Bay Area delivered a rare admonition saying the coming "brutal" storm system "needs to be taken seriously."
The driver of a car that plunged off a treacherous cliff in Northern California, injuring his two young children and his wife after the 250-foot drop, remained hospitalized with serious injuries Wednesday, according to the California Highway Patrol. Dharmesh A. Patel of Pasadena will be booked into the San Mateo County jail on suspicion of attempted murder and child abuse after he's released from a hospital, the highway patrol said. Rescuers initially hailed the family's survival as a “miracle” after the Tesla sedan plummeted down a notorious cliffside Monday along the Pacific Coast Highway near an area called Devil’s Slide that’s known for fatal wrecks.
Avengers star in ‘critical but stable’ condition after snowplough accident
The Qatar government paid for Mark Drakeford to stay in a luxury five-star hotel during his World Cup trip to the country, a Freedom of Information (FOI) request has revealed.
Absolutism over pragmatism. Chaos over efficiency. This is what Republicans deliver when they're in charge.
Baltimore City Public Schools confirmed that five students from Edmondson Westside High School were shot in a Wednesday incident at a shopping center.
The use of cell phones exposed the location of Russian troops to Ukrainian troops, prompting the weekend rocket attack that killed dozens.
A touchscreen display "smart" case is the most interesting feature of JBL's upcoming Tour Pro 2 earbuds.
Federal investigators have made little progress in solving the two-year-old mystery, quintupling the previous reward of $100,000.
New York City Mayor Eric Adams vowed Wednesday to fight his own City Hall — again — after he was ticketed for rats at his Brooklyn townhouse. A city health department inspector had issued two new summonses last month, just one day after the Democratic mayor appeared remotely before a hearing officer on Dec. 6 to get a $300 summons for rats at his property dismissed. “A rat burrow was observed along the ledge of the fenceline at front right,” the inspector wrote.
A stock market reading so bearish, it's bullish: Morning Brief – Yahoo Money
Date:
- Advertisement -
- Advertisement -