BofA Global Research has raised its year-end target for the S&P 500 index to 5,400, up from the previous 5,000, indicating a potential 5% increase from current levels.
In line with Barclays, UBS, and Goldman Sachs, BofA predicts the index will close the year within the range of 5,200 to 5,400.
Friday saw U.S. stocks achieving record highs, fueled by a technology stock rally driven by ongoing enthusiasm for artificial intelligence and further boosted by declining Treasury yields.
BofA's adjusted target reflects their belief that the risk premium to equities will decrease, given the anticipation of higher and more predictable earnings this year.
The brokerage points to the index's reduced debt since the 1980s, lower earnings-per-share (EPS) volatility, and a shift towards asset-light companies as factors contributing to this optimistic outlook.
According to Savita Subramanian, BofA's chief U.S. equity strategist, there is potential for improved margin stability as companies transition from global cost arbitrage and free capital-driven growth to efficiency and productivity.
While themes like AI and GLP-1 category weight-loss drugs are expected to drive market sentiments, Subramanian believes the market will diversify beyond these areas.
She also notes that passive inflows could continue propelling momentum in U.S. mega-cap stocks.
The strategist suggests a 5% market pullback in 2024, a historical occurrence happening thrice every year, with 10% corrections happening annually.
Subramanian anticipates a potential year-end rally once uncertainties surrounding the outcome of presidential elections are resolved.
Paraphrasing text from "Investing" all rights reserved by the original author.
