BofA Indicator Flashes Contrarian Buy Signal as Investors Flee Risk Assets

BofA indicator signals a contrarian buy as investor positioning has become very bearish, indicating a potential near-term rally.

The indicator dropped below 2, driven by outflows from EM debt, HY bonds, global equities, and jump in cash allocation.

In prior instances below 2, median US stock gains were 5.4% and global equities 7.6% over next 3 months.

BofA strategist Hartnett expects S&P 500 to hold above 4,200 and 10-year yield to stay under 5% in next 3-4 weeks.

Investors flocking to cash as growth expected to falter, but money funds saw record $108.9B outflow last week.