While some Wall Street experts are increasingly concerned and see the first signs of a possible bubble forming in the market, Bank of America is also expecting a temporary correction. The experts were nevertheless optimistic about the S&P 500.
• Record rally on the stock markets
• Experts believe blistering is possible
• Bank of America expects share price decline – price target for S&P 500 nevertheless increased
Record rally on stock markets worldwide
Stock markets around the world have recently been at their best, hitting one record high after another. For example, the Dow Jones, the NASDAQ Composite, the Japanese leading index Nikkei 225 and the German leading index DAX climbed to new heights. The technology indices and the S&P 500 in particular have recently benefited from positive economic news and impressive company results such as those from NVIDIA. The stock index, which covers 500 of the largest listed US companies, recently reached a new all-time high of around 5,166 points. This year, the US index has already increased by around 8.13 percent.
Is a bubble forming in the market?
Given this euphoric mood on the market and the associated record rally, analysts are now increasingly on the lookout for the first signs of a bubble. The CBOE Volatility Index, or VIX for short, also indicates a decline. The volatility measure, also known as Wall Street’s fear gauge, typically rises by around 25 percent in election years from the second quarter through November, MarketWatch explains. So uncertainty is increasing ahead of the votes in the USA. After the presidential elections, a year-end rally is more likely again.
Savita Subramian, head of equity strategies at Bank of America, also believes that a temporary decline in prices on the market is likely. Corrections of around five percent typically take place three times a year, and setbacks of around 10 percent also occur once a year, explains the expert. This has been the case repeatedly since 1929. “We are due after four months without a significant decline, and our US chief technician sees bearish divergences,” MarketWatch quotes from a note from the expert.
BofA experts raise price target for S&P 500
Nevertheless, the analyst team led by Subramian has recently also been optimistic, especially for the S&P 500. Using various methods, the team led by the BofA expert ultimately came to a confident forecast and increased its year-end target for the US stock index from 5,000 to 5,400 Points. Compared to the current level of 5,117.94 points, this would be an increase of around 5.5 percent (as of: closing price on March 11, 2024).
The BofA experts also addressed concerns that the market was experiencing dangerous euphoria. According to them, the mood is “thematic and secular,” MarketWatch quotes. The focus is particularly on AI and weight loss medications. However, Subramian and her team expect the market to rise beyond these issues.
With its optimistic forecast for the S&P 500, Bank of America joins a group of other experts such as Barclays, UBS and Goldman Sachs. They also expect the index to rise to 5,200 to 5,400 points this year. David Kostin’s team from Goldman Sachs justified its adjustment with “increased profit estimates”.
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