Successful Merrill Lynch contrarian indicator predicts 19 percent rally ahead

Traders work on the floor of the New York Stock Exchange (NYSE) on November 22, 2016 in New York City.
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Despite investors' enthusiasm over the pro-growth economic policies of President-elect Donald Trump, the average recommended allocation to equities by Wall Street pundits remains well below normal, a contrarian indicator that could pay off for those willing to bet against the crowd, according to Bank of America Merrill Lynch.

The firm's "Sell Side Indicator" predicts a 19 percent increase in the S&P 500 over the next 12 months. In the past 30 years, the signal had a success rate greater than 90 percent, according to the bank.

Equity and quant strategist Savita Subramanian explains how the "Sell Side Indicator" works:

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