Strategists Pull Back As
For over a month, we've looked at various
measures of sentiment, the vast majority of which were showing excessive
optimism from one group or another.
Obviously, that hasn't impacted equities'
performance so far.
One unusual outlier is the most recent
recommended equity allocation among Wall Street Strategists. It's
a little over a week old, but even so strategists lowered their
recommended allocation to 57% of a portfolio, from over 60% a few weeks
That allocation is the lowest since
December 2009 when the S&P 500 was trading at 1105, and other than the
bear-to-bull market transition period from December 2008 through
December 2009, it's the lowest since 1998.
There isn't always a clear pattern to when
and how much strategists alter their equity allocation recommendations.
Sometimes they ramp up exposure as stocks decline, other times as they
What is striking about the current
recommendation is how similar it is to late 2010.
At that point, stocks were recovering from
the summer correction. As they were challenging their previous
highs, strategists really started backing off equities.
Same thing this time. They
recommended a steady hand during the correction late last year, now
they're pulling back as stocks challenge their previous highs.
This is a big "if", but if stocks follow
through on that pattern, then a breakout to new highs will be
successful...at least for awhile.