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Bank of America Sets Target for S&P 500 at 4,600 for 2022

'There are too many similarities between today and 1999/2000 to ignore,' Bank of America strategists say. They set a 4,600 target for the S&P 500.
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The stock market’s drop the past two days may be a harbinger of a stall to come, say Bank of America strategists led by Savita Subramanian, head of U.S. equity and quantitative strategy.

They have a target of 4,600 for the S&P 500 next year, which represents a 1.3% decline from the current level of 4,660. The index has soared 24% year to date.

“There are too many similarities between today and 1999/2000 to ignore,” the strategists wrote in a report cited by CNBC. They were referring to the dot.com stock bubble of that era.

The bearish factors now include negative real interest rates, exploding inflation, manic initial-public-offering activity and liquidity risks in the world’s largest asset classes, such as U.S. Treasury securities and China real estate, BofA said.

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U.S. consumer prices soared 6.2% in the 12 months through October, the sharpest inflation in almost 30 years.

Meanwhile, supply-chain disruption is starting to wane, says JPMorgan Chase. Among the stocks that will benefit are PepsiCo  (PEP) - Get PepsiCo, Inc. Report, Caterpillar  (CAT) - Get Caterpillar Inc. Report, Schlumberger  (SLB) - Get Schlumberger NV Report and FedEx  (FDX) - Get FedEx Corporation Report.

“Global supply chain pressures are easing — if this persists, the S&P 500 should continue to deliver strong revenue growth and record margins,” JPMorgan analysts, led by Chief U.S. Equity Strategist Dubravko Lakos-Bujas, wrote in a commentary.

“S&P 500 companies delivered much stronger-than-expected results [for earnings in the third quarter], … and some key companies gave an encouraging outlook on supply chains.

“Our view all along has been that supply and labor shortages would be temporary and normalize with a decline in Covid-19.” 

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