A senior Bank of America strategist says the current equity rally is built on solid fundamentals that any pullback from current levels should be seen as a buying opportunity rather than a warning sign.
In a new CNBC interview, Marci McGregor, head of portfolio strategy at Bank of America, says the market is being driven by three converging forces that give her confidence the underlying bull case remains intact.
“If we get weakness after this really strong recovery from the March lows, I would see it as a buying opportunity because this is a market that is being fueled by corporate profits, by CapEx, and frankly by a strong labor market.”
Zooming in, McGregor says the strength is broader than the headline numbers suggest.
“It’s not just about the 18% growth that we saw. It’s about the fact that the median stock in the S&P saw 12% earnings growth and Q2 estimates and full year estimates are now being revised higher.”
On the consumer side, McGregor sees risk from elevated gas prices but says the labor market provides a meaningful offset.
“We’ve got to watch the consumer really closely with these high gas prices, but we’re seeing a labor market that is solid, and we’re seeing faster wage growth for higher-income households. So that’ll help consumption.”
As for CapEx, the BofA executive says the investment cycle extends well beyond the AI buildout, pointing to a manufacturing and industrial recovery as an additional and underappreciated pillar of the bull case.
“CapEx is on track and it’s not just about AI. I think this is also a market that is feeling a recovery in manufacturing and on the industrial side of the economy. There are a lot of reasons to be positive.”
On where the real opportunity lies, McGregor says she’s seeing a specific corner of the market offering a compelling setup.
“I’m still a little cautious on software. I haven’t seen real signals under the hood of the sector that we’re going to get a turnaround. I would think about the infrastructure around AI as where the real opportunity is going forward.”
As of Monday’s close, the S&P 500 is trading at an all-time high of 7,412.
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