Bank of America’s US equity and quantitative strategy team, led by Savita Subramanian, has raised its year-end target for the S&P 500 to 5,400 from 5,000, making it one of the most bullish predictions for the benchmark average this year. This move comes as the fifth boosted price target from strategists tracked by Yahoo Finance in the last month, reflecting the optimism surrounding the stock market.
The recent surge in stock prices has been supported by a second straight quarter of earnings growth and increased confidence in the US economy. Subramanian pointed out that fourth-quarter earnings grew by 4% compared to the previous year, and analysts are not cutting their forecasts for the current quarter at their usual rate. This positive outlook for earnings and the economy has been a common theme among the recent S&P 500 year-end target boosts across Wall Street.
Despite the bullish projections, Bank of America’s strategists anticipate some volatility in the market, with a potential pullback from current levels on the horizon. They noted that historically, 5% pullbacks in the S&P 500 happen three times a year on average, with one of those typically extending to a 10% correction.
Looking ahead, the team highlighted that as the 2024 presidential election approaches, volatility in stocks is expected to increase, but this is usually followed by a rally once uncertainty clears. Bank of America expects this end-of-year rally to be driven by a broader group of equities, as the gap between earnings growth of tech stocks and the rest of the S&P 500 narrows.
Overall, the optimistic outlook from Bank of America’s strategy team reflects the current positive sentiment in the market, with expectations for continued growth and potential opportunities for investors.
