Analysts at Bank of America are confident that the stock market will continue to develop positively by the end of the year. They are even expecting new highs.
• S&P 500 with strong gains so far this year
• Bank of America analysts see more confidence among bond investors
• Signal for continuation of the rally
The S&P 500 has already gained around 13 percent in the year to date. Even if the upward trend has been mixed in recent weeks, the bottom line is that investors can look forward to price increases. Experts at Bank of America apparently do not see a trend reversal for the rest of the year – on the contrary.
Bullish interest rate signal for the stock market
In a note quoted by Markets Insider, the US bank’s analyst team identified a leading bond market indicator that provides an optimistic signal for the stock market: “Constructive credit markets heading into September support the case for the bullish seasonality scenarios,” the portal quotes the BofA experts.
Specifically, the bond market sent a signal indicating that a new stock market high was possible by the end of the year. It said the option-adjusted spread on the Bloomberg US Corporate High Yield Average hit a new annual low earlier this month, meaning bond investors are becoming increasingly comfortable buying risky debt. Since bond investors are usually the first to react in panic to macroeconomic events and would demand higher returns on debt in that case, this is a leading indicator for the stock market, the analysts write. “We view this as a risk-on bullish leading indicator that favors possible new annual highs in the S&P 500,” said BofA analyst Stephen Suttmeier.
Numerous positive factors
According to Suttmeier, there are a number of factors that would promote an upward trend in the market. First, the expert cites a “mountain of money” in the form of money market funds worth $5.62 trillion that could fuel the rally. “With the S&P 500 continuing to thrive after solid returns in the first half of the year and August, we wouldn’t be surprised to see investors deploy cash and fuel a rally through year-end,” he continued.
Additionally, the fact that stocks from defensive sectors such as utilities and consumer staples would fall and break through support levels also provides a positive sign for the stock market. Investors would typically buy these types of stocks for safety reasons when the market is in a downturn. An optimistic risk appetite signal can therefore currently be seen.
S&P 500 would have to surpass 4,607 points
In order to reach a new record high, the S&P 500 would have to surpass the previous all-time high of 4,607 points, which was only reached on July 27th. The index is currently trading at 4,330 points, around 6 percent below the previous record level (as of the closing price on September 21, 2023).
Editorial team finanzen.net
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