Merrill Lynch reduces allocation to equities

by: Roger Nusbaum

You probably heard on CNBC this morning that Merrill Lynch reduced its target allocation for equities from 45% down to 40%, writes Roger Nusbaum. That is a pretty severe weight to equities.

According tot he report this the first change in two years. Assuming the two years is correct this has been a very bad call. In the last two years the S+P 500 is up 20%. Probably the wrong time to be 45% equities.

Usually these types of calls have very little practical use for the retail and institutional sales force at the giant firms. If an extreme call turns out to be right it can be used as a sales tool in the future.

I don't doubt that there is plenty of work behind the call but for most people an equities exposure in the 40s is quite extreme. I would want to have more behind the call than the action in the one year treasury as cited on CNBC.

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