The 'discipline & courage' to be bullish when everyone else is bearish ๐
BofA just raised its S&P 500 target, and it reminds me of a bold call they made in 2011 ๐คจ
On Sunday, BofAโs Savita Subramanian raised her year-end target for the S&P 500 to 4,300 from 4,000.
โThe era of easy money is behind us, but that might be a good thing,โ she wrote. โOver the past few decades we have enjoyed financially engineered growth: cheap financing, buybacks and cost cutting. Today, Corporate America has shifted focus to structural benefits โ efficiency/automation/AI and have bought themselves time to adapt via long-dated fixed rate debt.โ
Her new target is derived from a blend of five pricing models. Itโs all a bit technical, and weโre not gonna get into the details here.
However, I do think the timing of this upward revision is pretty extraordinary. After all, we could be a few weeks away from financial catastrophe should Congress fail to lift the debt ceiling and and prompt the U.S. government to go into default on its debts. Just last Friday, UBS analysts laid out a scenario where the S&P 500 quickly plummets by โup to 30%โ should the U.S. fail to meet its financial obligations.
โFor the bear case, talk to the person next to you,โ Subramanian wrote. โGeopolitics, Fed error, debt ceiling, financial crisis II, recession, โrich-cession,โ credit, stagflation, [commercial real estate], urban demise, civil unrest, rate cliffs, jobs etc. Stock v. bond allocations have plummeted to 2009 lows.โ
The S&P 500 was trading at around 4,200 on Monday, so her target isnโt exactly a wildly bullish prediction. Nevertheless, her upward revision stands out as most other analysts have been standing pat with their targets.
Echoes of an epic 2011 call from BofA ๐ฏ
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