Bank of America Cautions on S&P 500 Outlook, Flags AI Risks
Bank of America has tempered expectations for the S&P 500, projecting modest returns through 2026 with a year-end target of 7,100—just 5% above current levels. Head of U.S. Strategy Savita Subramanian anticipates 14% EPS growth to $320 next year but warns of liquidity constraints from reduced buybacks, higher capex, and slower rate cuts.
The firm’s bear and bull cases for 2026 span 5,500 to 8,500, reflecting divergent scenarios. While dismissing parallels to the Dotcom bubble due to stronger fundamentals, Subramanian highlighted an emerging 'AI air pocket'—a potential volatility trigger for tech-heavy indices.
Wall Street peers strike more optimistic tones: Deutsche Bank leads with an 8,000 target, followed by JPMorgan (7,500) and Barclays (7,400). The divergence underscores deepening macroeconomic uncertainty as markets weigh AI euphoria against tightening financial conditions.
