Bank of America He sees stocks going nowhere in 2023
Nearly a year from now, the S&P 500 is likely going nowhere, Bank of America Global Research strategists said in a year-ago outlook published Monday.
Equity strategists at BofA have set a 2023 year-end price target of 4,000 on the benchmark — up less than 1% from Monday’s close of 3,963.94 — for the S&P 500, which sees annual earnings fall 9% next year to $200.
This represents a 15 percent drop in revenue below current estimates. In the bank’s bearish case, the BofA S&P 500 fell below 3,000.
Savita Subramanian, head of U.S. equity strategy and quantitative strategy, told reporters on Monday that “one of the reasons we’re more healthy on earnings is the health of our corporate and consumer balance sheets.
A long-term driver of the bank’s depression is eroding profit margins as wage growth outpaces companies’ ability to keep up with inflation. According to BofA research, only about half of the companies in the S&P 500 are experiencing real sales growth, with sales numbers below inflation-driven headlines.
“The best environment to be an equity investor is when pricing power is rising faster than wages and people are buying more things,” Subramanian said. “Today may be the worst environment. [for equity investors]As wages are stuck and high, prices are falling and demand is falling.
Bank of America said the “still overcrowded megacaps” carrying the 2022 equity crisis could hamper profits for many of the companies in the index. BofA’s work shows that in the absence of the 50 biggest names in the S&P 500, the rest of the 450 valuations remain similar to history.
Far from eroding profits, BofA pointed to the democratization of investing and the “wealth effect” achieved in 2021-22 as another big threat to the market in the year ahead. The wealth effect is a behavioral economic phenomenon that suggests that consumers will spend more as the value of their wealth increases.
According to BofA data, $22 trillion was lost in financial markets this year, resulting in an estimated $700 billion hit to consumer spending power.
“Democratic disinvestment may amplify and amplify the negative impact on markets and economies in the coming years,” Bank of America view.
Subramanian: While 2022 will be all about the Fed, 2023 will be about the real economy.
While BofA is bullish in the short term, the bank remains bullish in the long run and will see the S&P 500 return 8% annually over the next decade. The company is advising investors to focus on the marathon and focus on the marathon.
The bank calculates the odds of an investor owning the S&P 500 over the next 10 years if it holds “more than a penny pass” for one day, or 54% of the positive return. cash at 94%
“Instead of focusing on near-term risks, equity investors should play the long game,” Subramanian said.
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Alexandra Semenova is a Yahoo Finance reporter. Follow her on Twitter. @alexandraandnyc
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