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.