Bloomberg tracks the recommended allocations for stocks, bonds, and cash by Wall Street strategists on a weekly basis. In the first 8 months of 2010, the recommended equity allocation remained right around 60% even as the market bounced up and down. Since the start of October, however, the recommended allocation has ticked lower to 57.67%.
While this might not seem like much, it is a pretty big drop considering the range in which the allocation has historically traded. The chart below (click to enlarge) shows the recommended equity weighting for portfolios since the start of 2008. The recommended weighting is typically a lagging indicator that will peak after the market peaks and bottom after the market bottoms.
At the moment, however, the reading has dropped lower just as the market has been heading higher. Do strategists know something that the market doesn't?
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