Bank of America’s equity chief flags valuation concerns and sector imbalances, targeting a 6% pullback in the S&P 500.
Bank of America Securities’ head of U.S. equity strategy highlights growing risks in the S&P 500, drawing parallels to early 2020 market conditions. Energy leads with upward earnings revisions, while consumer staples lag, historically signaling potential outperformance ahead—including a 73% gain during the 2000-2002 tech bust.
The strategist maintains a year-end S&P 500 target of 7,100, a 6% decline from current levels near 7,383. Concerns include reduced buybacks due to rising capex and elevated valuations in tech and communications, which she calls overcrowded. New issuance is also flagged as a red flag.
Positioning favors financials, energy, materials, and staples, while avoiding discretionary and utilities. Despite the bearish outlook for the index, she remains selective, citing the S&P 500 as the most crowded trade globally.