The stock market rally is far from over, according to Bank of America’s equity and quantitative strategy team.
In a research note released to reporters on Monday, BofA’s equity strategy team, led by Savita Subramanian, issued a year-end target of 6,666 for the S&P 500 in 2025. This call is the third highest among strategists tracked by Yahoo Finance and represents a roughly 10.5% gain from current levels.
Part of the company’s bullishness comes from expectations of strong economic growth. According to the note, some stocks will benefit more than others.
Bank of America’s economics team expects the U.S. economy to grow at an annual rate of 2.4% in 2025, higher than Bloomberg’s consensus forecasts for 2% growth.
This has led BofA to favor “GDP sensitive companies,” with the firm recommending overweights in the financial services (XLF), consumer discretionary (XLY), materials (XLB), real estate (XLRE) and utilities (XLU) sectors ).
“We see more opportunity in equities than in the index,” Subramanian wrote. “In particular, we like companies with healthy cash return prospects and ties to the US economy: large-cap value stocks.”
Subramanian’s team also calls for a widening of the stock market rally of the ‘Magnificent Seven’ tech stocks – Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla ( TSLA) and Nvidia (NVDA) – to the other 493 members of the S&P 500.
BofA believes that the S&P 500 equalweight index (^SPXEW), which is not overly affected by moves in the index’s largest stocks, like its cap-weighted index counterpart (^GSPC), will improve in 2025 to perform.
“The euphoria around megacap Tech is reflected in growth expectations for the Magnificent 7 approaching record highs just as their profits are set to slow and the average company’s profits are set to rise,” the company wrote.
This matches a call from Lori Calvasina, head of US equity strategy at RBC Capital Markets, who expects the S&P 500 to reach 6,600 by the end of next year, and is in line with Goldman Sachs’ projection that the S&P 500 will reach 6,600 points. 6,500 by 2025 amid ‘declining’ Big Tech outperformance.
‘In order for Value to perform better, we needed to see GDP rise somewhat in recent years [than the consensus of 2%]” says Calvasina, who expects GDP in a range of 2.1%-3% in 2025.
“We have given a lead to the broadening of market leadership or the shift to value [versus the Magnificent 7]but I think it’s close.”
