Bank of America cuts its year-end target for S&P 500 by 20%

S&P 500 will end 2022 at the 3,500 level, says Savita Subramanian. She’s the Head of U.S. Equity and Quantitative Strategy at the Bank of America Securities.

Subramanian’s remarks on CNBC’s ‘Fast Money’

Her forecast translates to another 5.0% decline from here. On CNBC’s “Fast Money”, Subramanian attributed her dovish view to inflation that topped 9.0% to hit a new forty-year high in June.

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We’re not seeing supply chain inflation alleviate as quickly as we were hoping. We’re not seeing signs of positioning, of sentiment bottom out. There hasn’t been that capitulation we like to see ahead of a market bottom.

The U.S. central bank is scheduled for its next policy meeting in the final week of July. Following the hotter-than-expected CPI print, many expect the Fed to raise rates by another 75 basis points this month.

Use the sell-off to build your long-term portfolio

Despite cutting her year-end target by 20%, Subramanian is not in the “cash is king” league. She actually dubs “now” a suitable time for investors to build their long-term portfolio. Explaining why, the strategist said:

The washout this year has set up the stage for a lot healthier next ten years. A soft landing, from an economic standpoint, is more realistic than a very dire, long-lived recession. We expect the Fed to start cutting rates in H2 of 2023.

Simply put, Subramanian is not expecting anything more than a “mild recession”. But in the worst-case scenario, she warned, market could visit the 3,000 to 3,200 level. The BofA expert also lowered her EPS estimate for the benchmark index to $218.