Bank of America Merrill Lynch has become on Tuesday the latest major Wall Street firm to raise its near-term forecast for the S&P 500 following the presidential election.
The bank increased its year-end target for the index to 2,100 from 2,000 as “the market has sailed through some of this year’s biggest shocks,” the U.K. referendum on whether to stay in the European Union and the U.S. presidential election, Savita Subramanian, head of U.S. equity and quantitative strategy at BofAML, said in a note.
While 2,100 is about 4.8 percent below Tuesday’s record close for the S&P 500, BofAML’s target raise follows similar moves by other strategists.
Last Friday, Deutsche Bank strategist David Bianco raised his year-end target to 2,200 from 2,150 and said in a report the S&P 500 “is likely to reach 2,250 by the inauguration.” He said the market is likely underappreciating a potential major boost to earnings per share from lower taxes, increased bank profits from rising yields and a much higher chance of a longer economic expansion.
Two days after the election, on Nov. 10, JPMorgan’s head of U.S. equity strategy Dubravko Lakos-Bujas published a note raising its near-term outlook on the S&P 500 to 2,300.
“Expectations of decreased regulation, favorable tax reform, increased fiscal spending, and less congressional gridlock should drive stronger revenue growth and higher net income margins,” Lakos-Bujas said in the note. Prior to the election, he had a year-end target of 2,100 for the S&P 500.
The three major U.S. indexes climbed to all-time highs for a second-straight day on Tuesday. The S&P 500 closed at 2,202.94, up nearly 3 percent since Election Day, with financials up 11.2 percent over that time.