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Bank of America strategist Savita Subramanian slashed the price on the S&P 500 to 3600 – a new Street low – from the prior 4500.
The strategist’s “floor” for the S&P 500 is 3000-3200 before year-end.
The slashed price target reflects lowered EPS forecast for 2022 to $218 from the prior $221, and for 2023 to $200 from $230. The new EPS forecast is now calling for a drop in earnings growth by 8% YoY.
“This is milder than the typical 15-20% economic recessionary decline but healthier consumer and corporate balance sheets and higher nominal GDP should provide offsets. The 70s/80s stagflation recessions saw an avg. earnings decline of 12%,” Subramanian told clients in a note.
Subramanian doesn’t believe we will see a bottom in the S&P 500 anytime soon.
“Our survey of macro and micro signals that occurred ahead of the prior seven bull markets yielded a few consistent indications, where over 70% of these were triggered ahead of almost every bull market (exception: 1974 bull market had 57% triggered). Today only 18% have been triggered. One that occurred ahead of every prior market bottom was the Fed cutting rates, which is not expected until 3Q23,” the strategist added.
