Macro

Subramanian Boosts S&P Target to 5,400 Amid Rally

Bank of America raises S&P 500 target to 5,400, citing strong earnings and resilient economy as key drivers.

By Bill Bullington

4/4, 07:48 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
SBA Communications Corporation
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Key Takeaway

  • Savita Subramanian of Bank of America raises S&P 500 year-end target from 5,000 to 5,400, signaling confidence in further stock gains.
  • Rally continues despite reduced expectations for Federal Reserve rate cuts this year.
  • Subramanian downplays fears of an early 2000s internet bubble repeat, suggesting solid grounds for current valuations.

Equity Rally Continues Amid Skepticism

The S&P 500 and NASDAQ have seen year-to-date increases of nearly 8% and 8.5%, respectively, despite initial skepticism around the potential for further growth in the stock market. Savita Subramanian, head of US equity strategy at Bank of America, has raised the year-end target for the S&P 500 from 5,000 to 5,400, signaling confidence in the market's upward trajectory. This adjustment is based on tweaks to fair value assumptions, despite a cooling bullish conviction due to improving sentiment across Wall Street. The Sell Side Indicator, a key sentiment gauge, now sits at a neutral position, leading to a tempered but still positive outlook for equity markets.

Bank of America Bullish on Select Stocks

Bank of America has identified several stocks with strong buy potential, including Catalyst Pharmaceuticals (CPRX), SBA Communications (SBAC), and BBB Foods (TBBB). These selections are based on various factors, including unique market positions, solid financial performance, and promising growth prospects. For instance, Catalyst Pharmaceuticals' portfolio of approved drugs for rare diseases and its efficient acquisition strategy have positioned it favorably in the biopharma sector. Similarly, SBA Communications' focus on cellular infrastructure real estate and BBB Foods' strong IPO and market positioning in the discount grocery sector highlight their potential for significant returns.

Market Optimism Supported by Fundamentals

Despite concerns of an overheated market, Bank of America's analysis suggests that the current equity rally is not indicative of a bubble. The bank points to strong earnings, a resilient economy, and a market sentiment that, while warmer, is not at the euphoric levels seen in previous market peaks. This perspective is supported by comparisons to historical market conditions, such as the neutral sentiment in 1995 during the dot-com bubble's expansion, and contrasts with the "wildly bullish" sentiment in 1999. Furthermore, the valuation of key technology stocks driving the rally is considered reasonable, with the S&P 500 excluding the largest tech stocks trading closer to its long-term average.

Street Views

  • Savita Subramanian, Bank of America (Bullish on the market):

    "When Savita Subramanian, head of US equity strategy at Bank of America, raised her outlook for stocks at the end of last year, there was a lot of skepticism that equities could go any higher... Then, in early March, she increased her year-end target for the S&P 500 even further, going from 5,000 to 5,400."