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 optimistic projections for the benchmark average this year among Wall Street strategists. The team cited improved sentiment but noted that areas of euphoria remain limited, such as in AI and GLP-1. This move marks the fifth boosted price target from strategists tracked by Yahoo Finance in the last month, reflecting the recent surge in stock prices to start the year.
Despite the positive outlook, the Bank of America team anticipates some volatility ahead, as historical data shows that on average, 5% pullbacks in the S&P 500 occur three times a year, with one extending to a 10% correction. Additionally, the team expects increased volatility in stocks leading up to the 2024 presidential election, although this is typically followed by a post-election rally as uncertainty dissipates. Looking ahead to the end-of-year rally, Bank of America predicts that it will be driven by a broader group of equities beyond just the tech stocks propelling the S&P 500 higher currently.
In conclusion, Bank of America’s bullish outlook is supported by a stronger economy and increased earnings projections. The team sees the gap between earnings growth of major tech stocks and the rest of the S&P 500 narrowing, indicating a potential broadening of market leadership. While the team acknowledges potential pullbacks and increased volatility in the near term, they remain optimistic about the overall trajectory of stocks and the potential for continued growth throughout the year.
