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Bank of America lifts year-end S&P 500 target to 4,300

Yahoo Finance Live analyzes Bank of America's latest year-end target for the S&P 500 as lawmakers contend with the looming default date on the debt ceiling.

Video transcript

- As we keep one eye on Washington though, we are keeping an eye on the macro story for the markets. Bank of America seeing more upside ahead in raising its year end target for the S&P 500. Strategists now calling for the S&P to finish the year at 4,300, even as markets have been stuck hovering around 4,200 amid the looming debt ceiling debate. Now they say easy earnings growth is in the rear view mirror. So companies will be focused on structural benefits, including artificial intelligence and automation.

And Seana, we should point out. Year end target at 4,300. It was a 4,000 before. So a little upside there from where they were before. Bottom line here, they are talking about the easy money being behind us. It's not about growth at all costs anymore. It is about efficiency. And on that front, they talk about artificial intelligence, automation, sort of companies moving forward with efficiency more in mind, which is why they think that there could be more of a leg up.

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- Yeah, certainly. I thought that was a pretty interesting commentary just given the fact of what we have seen play out this past earnings season and what the signals about what could be ahead here for the rest of the earnings season ahead this year. You mentioned the fact that they had the 4,000 target before this. Where we are today is right around 4,200. So it's not a lot of upside in terms of that 4,300 price target from where things are trading today.

And when you take into account the view out here from the street, certainly though, Bank of America more bullish than some of its counterparts out there because Morgan Stanley was out today reiterating the fact that they see some downside risk ahead given the fact that some of this bad news maybe has not been priced into the market. The exact opposite of what we're hearing from Bank of America today.

It was also interesting. They relied on five indicators here. Fair value, sentiment positioning, central bank impact, long term valuation, and also price momentum. I go back to that sentiment and positioning there because it seems like investor sentiment has been improving just a bit. The economic data has remained strong. Whether or not though that will continue given the fact that we have the debt ceiling negotiations still going on down in DC. We're rapidly approaching that ex-date. And then of course, all eyes ahead to the next Fed meeting. If they raise rates, that's going to take the markets by surprise, Akiko.

- Yeah. Rapidly approaching, Seana. We are specifically 10 days out from the ex-date. And you have to wonder how much of that has really dampened the mood in the markets. To what extent are we likely to see more upside, if there is some kind of resolution that comes out of DC?

Now deciphering that B of A note a little more. They talk specifically about being bullish on equal weighted S&P, not necessarily capweighted. And there's five specific things they point to. Concentration risk, valuation discount, duration risk, and then upside based on analysts price target.

So sort of where we've been seeing the market move but interesting to see that given there's still questions around where the Fed policy is going to go. Even if we get a pause, how much higher can rates potentially go even after that pause? That's still the question that we're going to be talking about for weeks now.

- We certainly will be.