BofA latest institution to boost S&P 500 target

Price target: Goldman Sachs’ headquarters in New York. The American lender has raised its outlook twice since December. This follows the Fed’s dovish policy shift and comes as the S&P 500 closes above the significant 5,100 milestone for the first time. — Bloomberg

NEW YORK: Bank of America Corp’s (BofA) Savita Subramanian is the latest equity strategist to ratchet up her target for the S&P 500 Index to among the highest on Wall Street after this year’s rally left forecasters blindsided.

Subramanian now expects the benchmark to end the year at 5,400, compared with her earlier target of 5,000, implying a gain of about 5% from last Friday’s close.

Indicators are flashing bullish signals of stronger earnings growth ahead and “surprising” profit margin resilience, she said.

“Bull markets end with euphoria – we’re not there yet,” Subramanian, the bank’s head of US equity and quantitative strategy, wrote in a note to clients on Sunday.

“Sentiment has improved, but areas of euphoria are limited.”

BofA’s 5,400 price target for the S&P 500 in 2024 now ranks as one of the most bullish on Wall Street, according to about two dozen sell-side strategists tracked by Bloomberg.

She joins the ranks of Ed Yardeni of Yardeni Research and Jonathan Golub of UBS Group AG, who both hold the same end of the year outlook.

The artificial intelligence frenzy has surprised Wall Street forecasters and spurred a race among strategists to keep up with a stock market rally that’s already blowing past their expectations.

In recent weeks, Piper Sandler and Co, UBS and Barclays Plc have all boosted their targets.

Goldman Sachs Group Inc and UBS have both already raised their outlooks twice since December, following the Federal Reserve’s dovish policy shift.

The S&P 500 closed above the significant 5,100 milestone last Friday for the first time in history, with the index already beating the average end of the year forecast of 4,899.40.

Leading indicators argue for upside to BofA’s earnings-per-share forecast of US$235, with the consensus’s US$243 seeming like a “reasonable” expectation for stronger economic growth and higher profits, the firm’s strategists said.

The S&P 500 has climbed 7.7% to start the year after rising 24% in 2023. The fourth-quarter earnings season reaffirmed that corporate profits are improving.

Out of the 98% of the benchmark’s market capitalisation that has been reported so far, 76% have beaten expectations.

Investors have broadly rewarded the stocks that beat on both profit and sales expectations, with those shares outperforming the benchmark by a median of 1.5% within a day of results, according to data compiled by Bloomberg Intelligence.That said, Subramanian sees a risk of a near-term pullback from growing bullish sentiment across Wall Street.

Take the firm’s sell-side indicator, which tracks the average recommended allocation to stocks by US sell-side strategists.

It edged higher last month, moving closer to flashing a contrarian “sell” signal than a “buy” for the first time since April 2022.

Piper Sandler’s Michael Kantrowitz, who had the most bearish US stock outlook on Wall Street in 2023, lifted his S&P 500 forecast to 5,250 last month.

That surpasses calls from some of his bullish peers, including John Stoltzfus, chief investment strategist at Oppenheimer Asset Management, and Thomas Lee, head of research at Fundstrat Global Advisors, who both see the S&P 500 hitting 5,200 by the end of the year. — Bloomberg

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