The stock market rally is far from over, according to Bank of America’s equity and quantitative strategy team.
In a research note released to reporters on Monday, BofA’s equity strategy team led by Savita Subramanian issued a 6,666 year-end target for the S&P 500 in 2025. The call comes in as the third-highest among strategists tracked by Yahoo Finance and represents a roughly 10.5% gain from current levels.
Part of the firm’s bullishness comes from an expectation for strong economic growth. Some equities are set to benefit more than others, according to the note.
Bank of America’s economics team projects the US economy will grow at an annualized rate of 2.4% in 2025, higher than Bloomberg consensus forecasts for 2% growth.
This has BofA favoring “GDP sensitive companies,” with the firm recommending overweights on the (XLF), Consumer Discretionary (XLY), Materials (XLB), Real Estate (XLRE), and Utilities (XLU) sectors.
“We see more opportunities in stocks than the index,” Subramanian wrote. “In particular, we like companies with healthy cash return prospects and a tether to the US economy: large cap Value stocks.”
“Euphoria around mega-cap Tech is evident in growth expectations for the Magnificent 7 approaching all-time highs, just when their earnings are slated to decelerate and the average company’s earnings are slated to accelerate,” the firm wrote.
This falls in a line with a call from RBC Capital Markets head of US equity strategy Lori Calvasina, who sees the S&P 500 hitting 6,600 at the end of next year, and is in a similar vein to Goldman Sachs’ projection for the S&P 500 to hit 6,500 in 2025 amid a “narrowing” Big Tech outperformance.
“For Value to outperform, in recent years we’ve needed to see GDP run a bit hotter [than the consensus of 2%],” said Calvasina, who sees GDP in a range of 2.1%-3% in 2025.
“We’ve given an edge to the broadening of market leadership or the shift into Value [versus the Magnificent 7], but think it’s a close call.”