Another Wall Street strategy team has optimistic predictions about how far stocks will go this year.
Bank of America's U.S. equities and quantitative strategy team, led by Savita Subramanian, raised its year-end target for the S&P 500 Index (^GSPC) to 5,400 from 5,000 in a note to clients on Sunday. This forecast and the latest call from UBS make it the most bullish prediction for this year's benchmark average among strategists tracked by Yahoo Finance.
“Bull markets end in euphoria, but we are not there yet,” Subramanian wrote. “Sentiment has improved, but the euphoria area is limited (AI, GLP-1).”
BofA's move marks the fifth price target hike by strategists tracked by Yahoo Finance in the last month. The outlook has become more optimistic after the stock price rose significantly at the start of the year. The S&P 500 and Nasdaq Composite (^IXIC) just posted their best performance for February since 2015, buoyed by two consecutive quarters of revenue growth and growing confidence in the trajectory of the US economy.
Subramanian said fourth-quarter profits rose 4% from a year earlier and noted that analysts were not revising their forecasts for the current quarter downward at the usual rate. This comes as Bank of America's economic research team just raised its growth outlook for this year. The combination of an improved earnings outlook and a more bullish outlook for the U.S. economy is a common thread across Wall Street in recent year-end target increases for the S&P 500.
But Bank of America strategists don't expect the stock's upward trajectory to be straight. Subramanian's team noted that there is some kind of retreat from the status quo. Levels may be just around the corner. Since 1929, the S&P 500 index has experienced an average of three 5% declines a year, with one of those declines typically amounting to a 10% correction, according to Bank of America research.
“She is due in four months without any significant decline,” Subramanian wrote.
The team also emphasized that while history shows that stock prices become more volatile as the 2024 presidential election approaches, they typically “then move higher” once uncertainty subsides.
And when the bull market arrives at the end of the year, Bank of America expects it will be driven by a broader group of stocks than the tech stocks that currently drive the S&P 500's gains.
“We expect leadership to further expand as the gap in earnings growth between the Magnificent 7 and the rest of the S&P 500 begins to narrow,” Subramanian wrote.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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