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Aug. 23, 2019, 10:15 a.m. EDT

Investors are so bearish, it’s almost time to start buying stocks again, says Bank of America

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By Barbara Kollmeyer, MarketWatch


AFP/Getty Images
Mind the bears in Wyoming, Jerome

He’s got the whole market in his hands.

Federal Reserve Chairman Jerome Powell has one big goal Friday - to reassure financial markets that they’re getting a September interest rate cut, and then some, and drown out Fed presidents making hawkish noises from the cheap seats.

Keeping us busy, the annual weekend Fed gathering in Jackson Hole, Wyoming boasts more Fed officials , central bankers from Israel to Belgium and finance luminaries, but markets only have eyes for Powell. At least they did until China announced a batch of retaliatory tariffs (see Markets). As investors begin to absorb the Powell comments rolling out, it's clear that markets may be in for a struggle.

His address may mark the last market sensitive event of what Bank of America Merrill Lynch refers to as “the summer of bonds” where bonds flew off the shelves as investors sought safety from the threat of global recession. The bank notes investors poured a record three-month $155 billion into bond funds, versus $98 billion that drained out in January 2019,

Our call of the day comes from the Bank of America strategists, whose Friday “Flow Show” highlights a contrarian signal telling investors to get ready to love stocks again.

Their key contrarian Bull & Bear Indicator sank to 2.4 in the latest week from 3.4. The gauge is used to determine if investors are too negative or positive about stocks, with zero the most bearish, and 10 the most bullish. The rule: 8 and over, sell stocks, 2 and under, buy.

If it looks familiar, the indicator fell to 2.5 in early June, almost triggering that green flag for stocks, but then all recession-fearing hell broke loose. Could it jump around again? Most definitely.

The market

The Dow /zigman2/quotes/210598065/realtime DJIA -0.19%  , S&P /zigman2/quotes/210599714/realtime SPX +0.0020%   and Nasdaq /zigman2/quotes/210598365/realtime COMP +0.07%   are lower, though losses have been pared a bit as Powell started speaking. China’s announcement of tariffs on $75 billion of U.S. goods has been weighing on markets. Oil /zigman2/quotes/209726859/delayed CLV19 +0.88% is sliding on that tariff news, while gold /zigman2/quotes/210039486/delayed GCZ19 +0.37% and the dollar /zigman2/quotes/210598269/delayed DXY -0.05% are up.

Plus: ‘Minsky moment’: We’re entering an ideal environment for buying gold

Read: Boris Johnson hits EU wall — here’s what it means for Europe’s economy

Europe stocks /zigman2/quotes/210599654/delayed XX:SXXP +0.61% also reversed course, while Asia stocks /zigman2/quotes/210598100/delayed AU:XJO +0.40%  had a mostly higher session.

The buzz

Shares of software group Salesforce.com /zigman2/quotes/200515854/composite CRM +0.54%  are surging on forecast-beating results. HP /zigman2/quotes/203461582/composite HPQ +0.21%  shares are down after the tech group announced a new CEO and weak results.

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,094.79
-52.29 -0.19%
Volume: 216.44M
Sept. 19, 2019 5:17p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,006.79
+0.06 +0.0020%
Volume: 1.55B
Sept. 19, 2019 5:17p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,182.88
+5.49 +0.07%
Volume: 1.58M
Sept. 19, 2019 5:16p
loading...
/zigman2/quotes/209726859/delayed
US : U.S.: Nymex
$ 58.64
+0.51 +0.88%
Volume: 176.00
Sept. 20, 2019 1:19a
loading...
/zigman2/quotes/210039486/delayed
US : U.S.: Nymex
$ 1,511.80
+5.60 +0.37%
Volume: 32,191
Sept. 20, 2019 1:33a
loading...
/zigman2/quotes/210598269/delayed
US : U.S.: ICE Futures U.S.
98.23
-0.05 -0.05%
Volume: 0.00
Sept. 20, 2019 1:33a
loading...
/zigman2/quotes/210599654/delayed
XX : STOXX
391.80
+2.39 +0.61%
Volume: 0.00
Sept. 19, 2019 5:50p
loading...
/zigman2/quotes/210598100/delayed
AU : S&P ASX
6,744.30
+26.80 +0.40%
Volume: 379,976
Sept. 20, 2019 3:23p
loading...
/zigman2/quotes/200515854/composite
US : U.S.: NYSE
$ 153.60
+0.83 +0.54%
Volume: 2.99M
Sept. 19, 2019 6:30p
P/E Ratio
127.72
Dividend Yield
N/A
Market Cap
$119.64 billion
Rev. per Employee
$379,486
loading...
/zigman2/quotes/203461582/composite
US : U.S.: NYSE
$ 18.75
+0.04 +0.21%
Volume: 10.15M
Sept. 19, 2019 6:30p
P/E Ratio
6.92
Dividend Yield
3.42%
Market Cap
$27.79 billion
Rev. per Employee
$1.07M
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