Bank of America's Sell Side Indicator (SSI)

Bank of America's Sell Side Indicator (SSI) held steady at 56.7% in November, marking its highest level since early 2022.

Despite the S&P 500 reaching a fresh all-time high after a 5.9% gain in November, strategists maintained their recommended equity allocations. This reflects cautious optimism amid mixed policy outlooks under the Trump administration, according to BofA.

The SSI tracks sell-side strategists' average equity allocation recommendations for balanced funds. It remains in "Neutral" territory but is closer to a contrarian "Sell" signal than a "Buy."

Specifically, the indicator is 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 an 11% potential price return for the S&P 500 over the next 12 months, contributing to the firm's 2025 year-end target of 6666 for the index.

Investor sentiment around bonds has significantly declined this year, with the average recommended bond allocation dropping by 2.9 percentage points. This decline has benefitted equities, which saw a 2.0 percentage point increase in allocations. Bond underperformance, driven by waning foreign demand and rising U.S. debt risks, further supports the case for equities.

BofA states, "Although equity sentiment and valuation are elevated, we still see ample reason to stick with stocks over bonds for the long term," highlighting potential annual price returns of 5-6% for the equal-weighted S&P 500 over the next decade, excluding dividends.