The Tell: Bank of America slashes S&P 500 target to ‘lowest on the Street’ after recession forecast

by | Jul 14, 2022 | Stock Market

Bank of America has lowered its 2022 target for the S&P 500 by 900 points, to 3,600, citing its forecast for a recession this year and expectations for a Federal Reserve “pivot” in 2023. The new year-end target is “the lowest on the Street,” said equity and quant strategists at Bank of America in a BofA Global Research report Thursday. BofA now forecasts a “mild” U.S. recession starting in the second half of 2022, they said. 

Other big Wall Street banks have also recently lowered their estimates for the S&P 500 after the stock market was badly bruised in the first half of 2022.  Credit Suisse earlier this month cut its target for the U.S. benchmark to 4,300. And in late June, Citigroup analysts lowered their S&P 500 forecast to 4,200, a revision they said was determined by blending “soft landing” and recession scenarios as the Federal Reserve aggressively raises interest rates to fight high inflation.  The S&P 500
has tumbled about 20.5% this year after closing 0.3% lower Thursday at 3,790.38. The index fell for a fifth straight day Thursday, its longest losing streak since June 14, according to Dow Jones Market Data.   A hotter-than-expected inflation report earlier this week sparked investor worries that the Fed will continue on its hawkish path of large rate increases, potentially causing a recession.  The BofA strategists said they expect the central bank will pause in the first half of 2023 and begin cutting rates in the second half of 2023. “The Fed is forecast to hike to 3.25%-3.5% by year-end,” they wrote.  Read: Investors piling into healthcare ETFs points to defensive bets, ‘bottom-fishing’ in biotech The strategists also said BofA now anticipates that the 10-year Treasury yield will fall to 2.75% by the end of 2022, compared with a prior forecast of 3. …

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