Bank of America Merrill Lynch strategists are taking a more cautious stance on U.S. stocks because of slowing earnings growth and high valuations, and they say investors would be better off with more cash holdings.
The firm's strategists recommended investors in its moderate portfolio shift 2 percent from stocks into cash. While not a big reallocation, it is telling in that the strategists see U.S. equities as less attractive, and that cash is a better alternative than the bond market.
"U.S. equity valuations continue to climb and do not look as attractive as they have in the past few years. Further, muted economic growth, a stronger dollar and lower oil prices contribute to expectations for slower earnings growth," the BofAML analysts wrote.
After the shift, investors with a moderate positioning would have 64 percent in stocks, 30 percent in bonds and six percent in cash.