- "Tepid sentiment is the more bullish input into our target; our Fair Value Model and weak estimate revisions are the most bearish," Subramanian wrote in the Monday note.
- The bank isn't more bullish because of a number of potential downside risks it sees, including a potential second wave of COVID-19.
- Read more on Business Insider .
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Bank of America issues a 'mea culpa' and boosts its S&P 500 forecast after missing out on the recent rally
Bank of America strategist Savita Subramanian on Monday raised her S&P 500 price target to 2,900 from 2,600 and issued a "mea culpa" for missing the recent rally.
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Bank of America issued a "mea culpa" and hiked its target price for the S&P 500 after missing out on the market's most recent rally.
In a Monday note, Savita Subramanian, the bank's head of equity and quantitative strategy, raised its S&P 500 target to 2,900 from 2,600 and noted that the index's "meteoric ascent" has been helped by Federal Reserve stimulus.
Since March 23 lows, the S&P 500 has surged as much as 43%, the swiftest recovery from bear-market territory in history, fueled by "unprecedented fiscal and monetary stimulus" due to the coronavirus pandemic, according to the note. Tech stocks, or "secular growth/ stay at home" beneficiaries have led the rally, driven by the increased liquidity.
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"Tepid sentiment is the more bullish input into our target; our Fair Value Model and weak estimate revisions are the most bearish," Subramanian wrote in the Monday note. "US stocks remain expensive vs. history on most measures except for free cash flow, but attractive vs. bonds."
Currently, the S&P 500 is above Bank of America's target, suggesting that it's trading above fair value, according to the note.
Going forward, the bull case for US equities includes a V-shaped recovery, a COVID-19 vaccine, no second wave of the illness, and tepid sentiment and high cash allocations, according to the note.
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On the flip side, Bank of America sees a number of downside risks to the S&P 500 target. Those include cyclically peaked 2019 earnings-per-share, risks of a second COVID-19 wave, US election risks, risks to a snapback in consumption and services, and borrowing from the future to fund today's growth.
See Also:
- Jeremy Grantham, the legendary investor who called the past 3 bubbles, says investors should be nervous about recent market moves and warns of 'deep economic wounds' regardless of a vaccine
- Baillie Gifford cashed in on Amazon and Tesla before the vast majority of investors. A 33-year partner at the firm breaks down a risk that scares him more than the pandemic and details 3 stocks he's buying for the new era.
- Mitch Rubin's fund has used a unique approach to reap 26% returns and double client assets this year. He breaks down his 3-part process for deciding which stocks to buy and what to bet against.
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