Wall Street "Nay", Main
A little over a
month ago, we took a look at Wall Street strategists' recommended
allocation to equities, which was dropping despite a rallying stock
It has dropped even further.
The latest update according to
Bloomberg shows that strategists recommend an investor hold only
55.3% of their portfolio in equities. Since 1998, the only time
they recommended less exposure to stocks was from January - August 2009
(which turned out to be a very poor time to have low long-term
At the same time, individual investors are
picking up the amount of their portfolios they hold in stocks,
according to AAII. In March it rose to 60.7% of their total
portfolio. That's not extremely high, but it's up from 52% a few
So currently, Wall Street strategists are
recommending that investors hold 55% of their portfolios in stocks, but
according to AAII some of those investors are actually holding more than
That's a "Wall Street minus Main Street"
difference of -5%.
The widest negative difference was -9% in
early May 2006. That didn't lead to any kind of market disaster,
though stocks did struggle for the next month.
The only other times the spread got to -5%
or worse were in early 2005 and July 2007. The 2005 occurrence
again didn't lead to anything worse than a choppy market while the 2007
As for the opposite extreme, when Wall
Street was +5% to +10% or more bullish than Main Street, stocks
did well, especially long-term. There were 81 weeks when the
spread was +10% or more, and the S&P was higher a year later 91% of the
time, averaging +19.0%.
The current spread is probably a minor
cause for intermediate- to long-term concern for stock investors, but as
usual this is a better "buy" indicator than "sell". If we get to a
time when the spread is +5% or more, then it'll be a good time to sit up
and take notice.