Bank of America Merrill Lynch is remaining cautious on stocks because there is virtually no positive economic data to be found in recent weeks, Dan Suzuki, the firm's senior U.S. equity investment strategist, said Friday.
The outlook for both near-term economic data and longer-term fiscal stimulus is looking grim, in his view, setting up a weak backdrop for equities even as investors build up bullish positions.
Suzuki noted that indexes that track surprises in economic data are no longer giving investors a reason to cheer, as key data like the ISM manufacturing survey showed industrial activity unexpectedly slipped into contraction and the August jobs report came in well below expectations.
"They basically peaked out last July and have been rolling over pretty hard since. Every major indicator we got this month surprised to the downside," he told CNBC's "Squawk Box."
The regional ISM surveys now look poised to deliver further disappointment, he added.
Suzuki doesn't think much of the prospects for fiscal stimulus either, despite the fact that both major party presidential candidates are talking up big infrastructure spending.
Bank of America Merrill Lynch believes that U.S. spending won't be as impressive as expected — if Congress approves it at all — and could face significant implementation delays. Expectations for stimulus in other corners of the globe are similarly inflated, Suzuki said.
"Our economists next year are pointing at 0.1 percentage points of benefit from stimulus. That's very little for all this hubbub you're getting," he said.
Short interest in the market — or bets stocks will fall — is at the lowest level since the spring of 2015 prior to a correction, while active managers have built up positions in cyclical stocks that tend to rise when the business cycle is on an upswing, Suzuki said, citing his firm's research.
"On the face of it, it seems like investors are really bearishly positioned, but when you dig through the data, you find that investors are actually more bullishly positioned than they've been in a long time," he said.