Bank of America cuts S&P 500 target to ‘lowest on the street’ after recession forecasts

Bank of America lowered its 2022 target for the S&P 500 index by 900 points, to 3,600, citing its forecast for a recession this year and the Fed’s “pivot” forecast in 2023.

The new year’s end goal is “the lowest at street level,” Bank of America equity and volume analysts said in a report released Thursday by BofA Global Research. They said Bank of America now expects a “moderate” US recession starting in the second half of 2022.

Other big Wall Street banks also recently lowered their S&P 500 estimates after the stock market was badly bruised in the first half of 2022.

Credit Suisse earlier this month lowered its target for the US index to 4,300. In late June, Citigroup analysts lowered their forecast for the Standard & Poor’s 500 Index to 4,200, an adjustment they said was determined by blending. ‘Soft landing’ and recession scenarios The Federal Reserve is aggressively raising interest rates to fight high inflation.

S&P 500 SPX Index,
-0.30%
It is down about 20.5% this year after closing 0.3% lower on Thursday at 3,790.38. The index fell for a fifth consecutive day on Thursday, its longest losing streak since June 14, according to Dow Jones market data.

a Inflation report warmer than expected Earlier this week, it raised investor concerns that the Federal Reserve would continue on its hawkish path of massive interest rate increases, potentially causing a recession.

Strategy analysts at Bank of America said they expect the central bank to pause in the first half of 2023 and begin cutting interest rates in the second half of 2023. They wrote: “The Fed is expected to rise to 3.25%-3.5% by the end of general”.

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Analysts also said that Bank of America now expects the 10-year Treasury yield to fall to 2.75% by the end of 2022, compared to a previous forecast of 3.5%.

10-year Treasury yield TMUBMUSD10Y,
2.964%
It rose 5.3 basis points Thursday to 2.957%, cutting a three-day losing streak, according to market data from Dow Jones.

“No recessions are alike,” wrote Bank of America strategists. The market usually drives the economy, peaking before recessions begin and declining before recessions end. But it gets late sometimes (like 1980).”

The S&P 500 ended Thursday 3.37% above its 52-week low of 3666.77 on June 16, according to market data from Dow Jones.

Strategists at Bank of America revised their forecasts for the S&P 500 stock index earnings this year to $218, down from $221, according to their report. They lowered their 2023 EPS forecast to $200 from $230.

The report shows that the ‘worst case’ scenario for the S&P 500 this year remains at 3000-3200.

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