Stock bullishness across Wall Street is back to pre-pandemic levels — and will likely spike even more after the US election, BofA says

• Bank of America's Sell Side Indicator — which tracks Wall Street's bullishness toward stocks — rose to 56% in September, its highest since the coronavirus pandemic began.
• The reading signals an 11% gain for the S&P 500 over the next 12 months, the team led by Savita Subramanian said.
• In past instances when the gauge sat this low, returns over the next year were positive 94% of the time, they added.
• Past election seasons also saw sentiment usually increase in November and December, according to the bank.
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After months of virus fears, record-breaking rallies, and unprecedented stimulus, Wall Street's outlook for stocks is back to its pre-pandemic norm.

Bank of America's Sell Side Indicator — which measures stock bullishness among Wall Street strategists — climbed to 56% in September, its highest since the coronavirus crisis began. The gauge latest reading sets a 12-month S&P 500 target of 3,734, implying an 11% return for the benchmark.

The reading remains in the same "neutral" territory it entered in 2016. The bank's "buy" threshold, fell slightly to 51.4%, while the level when it recommends selling shares fell to 60.7%.

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Bank of America's indicator has a strong record of forecasting near-term market gains. In past instances the gauge sat so low, returns over the next 12 months were positive 94% of the time, the team led by Savita Subramanian said. The median 12-month return in said instances is 20%.

The indicator's uptick comes as investors and strategists alike gird for election-season volatility. Though several firms warn that delayed election results could keep markets frothy for weeks, precedent suggests the months immediately before and after the election will see sentiment turn even more optimistic.

Read more: BlackRock's investment chief breaks down why Congress passing a second round of fiscal stimulus is 'quite serious' for markets and the economy — and pinpoints which sectors will benefit in either scenario

In the eight previous election seasons, sentiment improved in 75% of Octobers, 63% of Novembers, and 50% of Decembers, according to the bank.

However, the trend could spell out a bearish swing should the coronavirus prolong an outcome. The S&P 500 sank roughly 5% in 2000 between election day and when the Supreme Court decided on the race in December. With President Donald Trump hinting he'll contest a Biden victory, a similar plunge could emerge in the final months of 2020.

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