Tags: Subramanian | indicator | stocks | bear

BofA's Subramanian: 'When Things Look Bad Is When You Want to Buy' Stocks

By Dan Weil   |   Thursday, 14 Aug 2014 10:55 AM

While the stock market's recent volatility has scared away some market participants, Savita Subramanian, chief U.S. stock strategist at Bank of America Merrill Lynch, isn't one of them.

"When everyone thinks things look bad, that is when you want to buy," she tells The Wall Street Journal. "It is when everyone is positive that you want to sell."

The S&P 500 index fell 4.3 percent from its July 24 record high to last Thursday's low. Since then it has rebounded 2.3 percent.

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BofA has an indicator for stocks based on the sentiment of Wall Street strategists that it has used for 30 years. The indicator shows that when the strategists are bullish stocks typically fall, and when they're bearish stocks rise.

Strategists currently recommend devoting just 51 percent of your portfolio to in stocks, compared with an average of 60 percent for the last 15 years. Any average recommendation lower than 54 percent is considered a buy signal.

With bearishness at its current level, stocks have gained 98 percent of the time, Subramanian notes. The indicator currently forecasts a 22 percent gain in stocks in the next year.

Bob Doll, chief equity strategist at Nuveen Asset Management, is one analyst who is bullish, at least mildly so.

He predicts the S&P 500 will end the year at 1,996. That represents an 8 percent increase from last year's close.

Strong earnings will fuel the gains, Doll tells Yahoo. "The second quarter is a great down payment. The fact that 75 percent of companies reported better-than-expected earnings" is a plus sign for the market, he said.

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