Bank of America (BofA) has introduced a 12-month target of 7,800 for the S&P 500, implying approximately 2% upside from current levels, while raising its year-end forecast and identifying several risks to US equities.
In a note published this week, strategist Savita Subramanian increased the bank’s year-end target to 7,400 from 7,100. The revised projection implies a decline of approximately 3% from current levels.
“Our 12-month target of 7800 is nothing to write home about, suggesting +2% from here,” Subramanian wrote.
The strategist expects investors to have an opportunity to enter the market at lower levels, citing the relatively limited number of market pullbacks recorded this year.
According to Subramanian, the S&P 500 has experienced only one decline of at least 5% this year, in March, compared with three such declines in a typical year. She also noted that approximately half of BofA’s indicators associated with bear markets have been triggered.
The bank identified inflation, Federal Reserve policy, earnings quality and credit conditions as potential sources of market risk. Subramanian said current price-to-earnings valuations imply an inflation outlook considerably below the bank’s own forecasts.
She also referenced the 1970s, when upside inflation risks, dollar depreciation and Federal Reserve interest-rate increases coincided with an equity market decline exceeding 40%.
On US politics, Subramanian described concerns about a Democratic sweep in the midterm elections as a “red herring” for capital expenditure, arguing that state governments are largely responsible for driving the artificial intelligence infrastructure expansion.
Despite the near-term risks, the strategist maintained her longer-term positive outlook for equities, citing potential productivity improvements as businesses replace labour-intensive activities with scalable processes.
BofA forecasts S&P 500 earnings growth of 33% in 2026, followed by a further 12% increase in 2027.
Within equities, the bank expressed a preference for large-cap value stocks, selected small- and mid-cap companies and the equal-weighted S&P 500 over the traditional market-capitalisation-weighted index.
The forecasts indicate that BofA expects limited index-level gains over the next 12 months, alongside differences in performance across market segments.
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