Bank of America says much of the market’s easy upside may now be gone as sentiment inches closer to euphoria.
In a new CNBC interview, Savita Subramanian, the head of US Equity and Quantitative Strategy at BofA Global Research, says today’s market environment is very different from the one witnessed in June 2023, when investors were paralyzed by recession fears.
But since then, the S&P 500 has climbed from about 4,300 to 7,000, and Subramanian says potential upside from current levels may be limited.
“Back then, there were a lot of things going right for the market. It was cheaper. There was very little debt. You know, no capital raises. You didn’t see a lot of interest in equities. It was still like we’re heading into a recession. Everything is awful. Today, the economy is booming. Everything’s fine. You want to be long stocks and crypto, and everything else out there. So I feel like sentiment has really done a big 180.”
Subramanian also mentions one model being used inside BofA to support her 7,100 year-end target for the S&P 500.
“We have one model at BofA that we’ve been running since Rich Bernstein started it back in the ’80s. And it is still telling us that sentiment on stocks is not necessarily euphoric. So I think there could be upside in a lot of areas of the market. But sentiment on AI and tech feels pretty darn euphoric to me at this point.”
The Mag 7 has been doing the heavy lifting for the S&P 500 over the past few years, and Subramanian appears to suggest that the market will not likely witness double-digit gains this year as AI and tech names stall.
As of Friday’s close, the S&P 500 is trading at 6,939.
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