BofA Says a ‘Real’ Trade Deal Could Vault S&P 500 to Record High
- Profit estimates, stock valuations have fallen amid trade risk
- A best-case scenario could spark a rally of as much as 10%
Photographer: Billy H.C. Kwok/Bloomberg
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With stocks rallying this year amid signs of nascent progress in China-U.S. trade talks, investors may be inclined to conclude that there is not much upside left when a deal is reached. That’s wrong, warned Bank of America.
The firm’s model on corporate earnings and equity valuations suggests that the market has priced in “a partial deal,” one where only some of the issues get resolved in favor of corporate America, according to strategists led by Savita Subramanian. In a best-case scenario, the S&P 500 could climb 5 percent to 10 percent when a “real deal” is struck. That would take the index to as high as 3,020 from the latest close, a level that exceeds the September all-time high of 2,930.