Savita Subramian, a leading stock market analyst at Bank of America (NYSE:BAC), is fearlessly bucking the trend of more cautious analysts. In a bold call, she predicts the S&P 500 could climb another 8% by year’s end, defying concerns about slowing growth and rising interest rates. Her optimism stems from some fundamental ways companies have changed over the past few years.
Why BofA’s Top Analyst Is Bullish
Subramian has a TipRanks percentage of profitable recommendations at an impressive 75%, with an equally impressive average return per transaction of 39.40%. Her current bullishness hinges on the fundamental strength of U.S. corporations. She argues that, unlike previous bull markets, today’s S&P 500 is less reliant on debt (less leveraged) and carries fewer physical assets (more asset-light). This leaner, more efficient profile translates to lower earnings volatility, making the market less susceptible to economic downturns.
Brick-and-Mortar to Brains and Bandwidth
The “asset-light” aspect of Subramian’s optimism is particularly noteworthy. She believes today’s economy is different than in the past. Not many years ago companies tied up significant capital in factories, equipment, and inventory. Today’s S&P 500 (SPX) is dominated by technology and service-oriented businesses that require less physical infrastructure. This shift allows them to scale up or down more easily, and thus adapt to changing economic conditions.
Lower Leverage Means More Upside
Subramian also highlights the reduced leverage of the current market. In less complex terms, companies have reduced debt compared to their earnings potential. This financial prudence makes them less vulnerable to rising interest rates which is a major concern for many investors. With a smaller debt burden, more companies can decide to allocate additional resources toward growth initiatives, further strengthening their stock prices.
Key Takeaway
Savita Subramian’s forecast offers a refreshing dose of optimism for investors navigating a volatile market. And she backs the forecast up with subtle factors that are not widely known. While her prediction is certainly not without risk, her analysis highlights the underlying strength of U.S. corporations. The combination of less leverage and a more asset-light composition suggests the S&P 500 may still have room to run.
