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The S&P 500 index may have stormed into the record books after Election Day, but the benchmark remains likely to give back some of those recent gains before the year is over, says one prominent Wall Street analyst.
Savita Subramanian, equity and quant strategist at Bank of America Merrill Lynch, exercised some cautious optimism in a late Tuesday note by increasing her year-end S&P 500 SPX, +0.22% target to 2,100 from 2,000, accounting for the recent rally in stocks but noting there are still possible macro shocks on the horizon over the next month.
“There are still potential catalysts for macro shocks through the end of the year (OPEC meeting, Italian Referendum, central bank meetings, etc.), but the market has sailed through some of this year’s biggest shocks,” including Britain’s June vote to leave the European Union and the U.S. presidential election earlier this month, Subramanian said.
The S&P 500 is currently trading up above 2,200 following its first close above that level on Tuesday. A drop to 2,100 by the end of the year would be a 4.6% drop, but would still leave the index up 2.7% for the year.
That plants Subramanian’s target right around the current 200-day moving average of the S&P 500 of 2,101.45, which had fallen to a year-to-date low of 2,010.81 on May 25.
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While valuation models suggest an even lower target of 1,942, Subramanian said that’s balanced out by still-bearish sentiment toward stocks—a contrarian buy signal—and analyst earnings estimate revisions, which target the S&P 500 at 2,235 and 2,203, respectively.
Back in February, Subramanian cut her S&P 500 target to 2,000 from an initial target of 2,200 before the year began.
