June 29, 2022

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Is the stock market flashing a net bullish sign?: Morning Brief

2 min read

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

Monday, April 4, 2022

“Cash is trash,” billionaire Ray Dalio told me in a chat recently (more on that below). And he may be right as it pertains to the current investing backdrop.

Cash allocations are almost two times more than last year’s levels, according to new data out of Bank of America. The data looks at the average recommended allocation to stocks and cash by sell-side strategists.

After recommended cash allocations hit a low of 2.5% last August, they have jumped to 4.1% today. BofA says this is a “big” move.

At the same time, sentiment on stocks has declined for three straight months as investors digest worrisome headlines on inflation, the war between Russia and Ukraine, and weakening corporate profit margins.

While investors holding more cash appears like a negative for stocks at first blush, it’s actually not historically, points out BofA strategist Savita Subramanian.

“What we have found is that consensus Wall Street strategists are a very reliable contrarian indicator. When they are telling you to dial down your equity exposure and increase your allocation to cash, that’s actually net bullish. What we found is that when the bulk of evidence is telling you to be more cautious and defensive, probably all of that information is priced into the market and the market is more likely to surprise in the opposite direction,” Subramanian said on Yahoo Finance Live.

So on that score, trash cash and maybe put $1,000 into GameStop and another $1,000 into a boring as all hell dividend-paying company (note: this is NOT investment advice). YOLO!

Happy trading!

Odds and ends

One-on-one with Ray Dalio: I had the chance to catch up with Bridgewater Associates founder and co-chief investment officer Ray Dalio. So be on the lookout for a lot of “stuff” hitting Yahoo Finance today from that lengthy chat, which comes as a new post on…

2022-04-04 05:09:45

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