Wall Street still hates cash more than stocks even as the 'TINA' trade collapses and bond yields soar, Bank of America says

• Wall Street has yet to reach "full capitulation" as cash remains more hated than stocks, according to Bank of America.
• It's an odd dilemma given the sharp decline in stocks this year and the attractive yields on cash.
• "From a risk/reward perspective, cash's profile has markedly improved relative to equities," BofA said.

The stock market's year-to-date decline of almost 25% is still not enough to send Wall Street into full capitulation mode, according to a Monday note from Bank of America.

The firm's sell-side equity indicator, which tracks the shifting allocation recommendations of Wall Street strategists, remains in neutral territory, according to the note. BofA's Savita Subramanian wants to see the indicator hit "Buy" territory, signaling that most Wall Street strategists are bearish on stocks, before getting more bullish on the market.

That's because the indicator has a knack for giving contrarian signals since its inception.

"We note that Wall Street recommended underweighting equities through the entire bull market of the 1980s and 1990s as well as the 2009 to 2020 bull," Subramanian said.

Additionally, the survey-based indicator found that Wall Street strategists still hate cash more than stocks, despite the sharp decline in the latter and the higher yields of the former.

The bank highlighted that while Wall Street strategists "have become more cautious on equities year-to-date," their recommended stock allocation is just one percentage point below the post-Great Financial Crisis average.

Meanwhile, their recommended cash allocation is up just 0.9 percentage points to 3.7% year-to-date, which is well below the 10.5% level seen in 2006 to 2007, according to the bank.

The big difference between then and now is that the "TINA" trade, or there is no alternative to stocks, has been obliterated by soaring cash yields this year. Most money market funds currently offer yields just below 3%, while the 2-Year Treasury bond sports a yield of 4.1%. That's after rates stayed near 0% for more than a decade after the 2008 crash.

"From a risk/reward perspective, cash's profile has markedly improved relative to equities," BofA's Savita Subramanian said, though admitting that with inflation still near 40-year record highs, stocks could provide better protection against rising prices, as they have in the past.

All-in, Wall Street's still low allocation to cash, combined with a "Neutral" rating on its contrarian sell-side indicator, leads the bank to stick with its year-end S&P 500 target of 3,600. The S&P 500 closed just below that level at 3,585 on Friday.