Sarah Min
September 20, 2023

Bank of America’s Savita Subramanian raised her 2023 year-end S&P 500 price target to 4,600, saying the rally will broaden out from here.

The equity and quant strategist increased her S&P 500 target to 4,600 from 4,300 — placing it among the higher forecasts in CNBC’s Market Strategist survey. The new target implies 4% upside for the broader market.

″‘Recession averted’ says the consensus economist, but a fresh wave of bear narratives around equities have emerged,” Subramanian acknowledged on Wednesday.

However, “the net message of our five target indicators is bullish,” she added.

The strategist expects even better returns for the average stock over the S&P 500, which is weighed by market value, as the rally broadens.

“Our five market timing indicators and broader US equity strategy views support better returns from the equal-weighted S&P 500 than the cap-weighted index,” she said in the note.

Her bear case is 4,100 and bull case is 4,700 for the S&P 500.

The change comes as a raft of bearish concerns including rising oil prices and a weakening global macro weigh on markets. All three major averages are negative on the month, and the S&P 500 and Nasdaq Composite are lower this quarter.

However, Subramanian expects that gains in productivity made with artificial intelligence will drive earnings growth for companies going forward — a development that would especially boost the equal-weighted S&P 500 over the cap-weighted index.

“Productivity, efficiency, less labor intensity AI is part of this, as are automation, right-sizing labor, and wage inflation incentives after a decade of easy, financially-engineered earnings growth (Exhibit 22) Productivity would likely drive the equity risk premium (ERP) lower,” Subramanian wrote.

“Old economy, inefficient co’s (more prevalent in the equal weighted S&P 500) could benefit as much as Tech and growth, but have not priced this theme in as richly,” she added.