Bank of America strategist Savita Subramanian believes that there are “too many red flags” in the market according to a note she wrote June 5th. She believes “it’s better to lock in profits,” as she lowered S&P 500 expectations to 7,100 by the end of the year.
Savita’s “bear market signposts” include stock performance expectations, consumer confidence, credit stress levels, and credit tightening conditions.
One indicator showed high P/E stocks led low P/E stocks by a huge gap, which Savita calls “a sign of excessive speculation.” She also claims “lofty long-term growth expectations” are reaching levels that can make equities “more vulnerable to disappointment.”
Other Wall Street analysts, however, seem to disagree with the Bank of America analyst and believe that AI can continue carrying the market until the end of the year.
Citigroup strategist Scott Chronert raised his year-end S&P 500 expectations to 8,100 from 7,700, expressing his belief in AI continuing to help companies beat earnings expectations. Chronert claims “While macro conditions certainly matter, the fact is that the breadth of the AI-related ecosystem is broadening beyond just tech. So, while ongoing concerns regarding the Iran conflict, oil/energy prices, inflation, and interest rates are all potential volatility drivers, it is [the] underlying fundamental trajectories associated with AI spend that remain the focus for now. Other sectors matter, just not to the same degree.”
Fundstat’s Tom Lee seems to agree, he believes that Tuesday’s drop is the market “won’t derail the tech trade.” Tom says companies are “selling some of the recent winners” in anticipation of SpaceX’s IPO on Friday. He goes on to say that “this is a dip that’s going to be bought.”
With the addition of AI companies like SpaceX, Anthropic, and OpenAI to the market along with AI’s continuing explosion, it’s tough to believe that the top is in.
We’re in a K-shaped economy, so while there are concerns for energy and oil prices, the market has completely priced out the Iran war. AI continues to make people richer, while unemployment is at 4.3% and the price of oil changes by the second. If you’re in the market you’ll continue to make money, if you’re not in the market you’ll continue to feel the weight of the economy.
