BofA’s Subramanian Dumps Dire S&P 500 Call After Big Rally

(Bloomberg) -- Count Savita Subramanian as the latest strategist to surrender to an equity rally that has powered the S&P 500 well past Wall Street's year-end forecast.  

The head of U.S. equity and quantitative strategy at Bank of America Corp. boosted her 2021 projection for the benchmark index to 4,250 from 3,800. The gauge closed around 4,520 on Tuesday. The old target had put her on par with Barry Bannister at Stifel Nicolaus as the most bearish among strategists tracked by Bloomberg. 

While tempering down her bearishness, Subramanian isn't ready to give up on her caution stance. The new prediction implies a 6% decline for the index by December and her target for next year -- 4,600 -- represents a mere 2% gain. 

Euphoric investor sentiment is leaving the market vulnerable to negative shocks, while rising wage and input costs are threatening profit margins for corporate America. With the Federal Reserve balance-sheet expansion having explained more than half of the market's returns in the past decade, the central bank's plan to roll back its monetary support means no upside, she says. 

“We see little to get excited about,” Subramanian wrote in a note to clients. “This may not end now. But when it ends, it could end badly.”

The S&P 500 fell 0.3% to 4,507.42 at 1:23 p.m. Wednesday in New York.

As the gauge has rallied more than 20% this year, crushing the most optimistic call at the start of 2021, strategists are now scrambling to boost targets to catch up with the market. 

Read more: Levkovich Issues Mea Culpa While Sticking to Dire S&P 500 Call

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