Wall Street's opinion on the US stock market's swift ascent is sharply divided, with even Bank of America Corp. (BAC, Financial) strategists not seeing eye to eye on the matter. While some view the market's rapid rise as a concern, others, like BofA's Savita Subramanian, argue that strong earnings and a resilient US economy justify further gains, countering the views of the firm's chief investment strategist, Michael Hartnett.
Subramanian, who leads US equity and quantitative strategy at BofA, highlighted in a Bloomberg Television interview that there's no widespread euphoria driving the market to bubble territory. She pointed out the risks are more pronounced in private markets such as private credit and equity, as well as regional banks, rather than in public stocks.
The S&P 500 Index's recent performance, surpassing the 5,100 milestone and beating average year-end forecasts, has sparked debate among Wall Street analysts. Despite a 24% rise in 2023 and an 8% increase at the start of the year, Subramanian sees potential for a minor correction but remains optimistic about large-cap stocks until the Federal Reserve begins to cut interest rates.
On the other hand, the Russell 2000 Index, which represents small-cap stocks, is trading at its long-term average multiple but still at a near-record discount compared to larger companies. BofA's head of small- and mid-cap strategy, Jill Carey Hall, sees this as an opportunity, especially within the financial sector, advocating for selective stock picking.
The excitement around artificial intelligence (AI) stocks has caught Wall Street by surprise, leading to a revision of S&P 500 year-end targets by several strategists, including Subramanian. She now forecasts a year-end target of 5,400 for the S&P 500, aligning with other optimistic projections from industry experts.
Despite the market's strong performance, there's a split among investors regarding whether AI stocks are in a bubble, with opinions divided in BofA's latest fund manager survey. This division underscores the uncertainty and varied expectations for the market's future direction.
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