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Watch Out: Wall Street Firms Hit 7-Year High in Allocation to the Stock Market

Despite the stock market’s high volatility sparked by worries about the domestic and global economies, Wall Street strategists are telling clients to overweight their portfolios in stocks at the highest level in seven years (see chart below from Bloomberg) as opposed to being in strong bond and cash positions.  Historically, this is a contrarian indicator that investors should take defensive action.  Why?  When the analysts are overwhelmingly over weighted in stocks, historically the stock market underperforms.

Watch Out: Wall Street Firms Hit 7-Year High in Allocation to the Stock Market
Watch Out: Wall Street Firms Hit 7-Year High in Allocation to the Stock Market

Brad Lamensdorf

Brad Lamensdorf, the founder and portfolio manager of Active Alts, is a principal and co-manager of the AdvisorShares Ranger Equity Bear ETF. He previously managed a long-short investment partnership from 1998-2005 under the name Tarpon Capital Management. Earlier in his career Mr. Lamensdorf was an equity trader/market strategist for the Bass Brothers’ trading arm. He managed a short only portfolio in addition to co-managing a $1bil hedging program. He also served as in-house market strategist for the entire internal and external network of Bass Brothers money managers.

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