BofA and Credit Suisse Differ on Equity Market


Oct. 5 2019, Updated 6:35 a.m. ET

On October 1, Credit Suisse’s (CS) Suresh Tantia told CNBC that the equity market will rebound from the current levels. On the same day, the S&P 500 declined by 1.2% and closed at $2,940.25. Central banks’ dovish stance and easing of geopolitical risks will push the market higher, according to the investment strategist.

The US and China postponed the implementation of tariffs. Also, the United Kingdom parliament may stop Boris Johnson for a hard Brexit. Last month ECB slashed the deposit rate lower into the negative and started quantitative easing. Also, he expects a further rate reduction in the US. The new home sales number rose by 15% in the last three months. It shows stronger US consumers.

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BAC views on the equity market

On October 2, Bank of America or BofA’s (BAC) Merrill Lynch in a note to clients warned for any upside in the equity market. “Supportive central banks, bearish sentiment, and attractive yield opportunities are supportive of stocks. But ongoing trade uncertainty and signs of macro deterioration… leave us neutral on the S&P 500 for 2019,” the US chief equity strategist said. 

BAC’s S&P 500 target for 2019 is $2,900 level. In the last trading session, the S&P 500 closed at $2,910.63. BAC’s managing director Savita Subramanian said, “to be one of the most hated bull markets on record.” She expressed concern about the 10th consecutive year of the rising equity market. 

Morgan Stanley says reduce cyclical stocks

Morgan Stanley (MS) had a lower target for the equity market than BofA. MS strategist Mike Wilson expects the S&P 500 to fall to $2,700 level this quarter. The chief investment officer has a bearish view on the equity market this year. Earlier he recommended investors reduce exposure to cyclical stocks.

On October 3, Barclays’ head of US economic research said to CNBC, “Based on the data that we have on hand and understanding how the economy tends to evolve, we would put the number around 25 to 30% chance over say the next four-quarter horizon.” Michael Gapen was referring to the chances of a recession.

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Cyclical stocks like Ford (F) and General Electric (GE) could react to an equity meltdown. So far this year, F and GE have risen 14.2% and 16.5%, respectively. During May, the S&P 500 had the worst monthly decline for this year. In that month, F and GE’s stock prices fell 8.9% and 7.2%, respectively.

WFC and GS see all-time highs in the future

But, like Credit Suisse’s strategist views, Wells Fargo (WFC) and Goldman Sachs (GS) expect upside in the equity market. Wells Fargo and Goldman Sachs have the target of $3,088 and $3,100 for the S&P 500 in 2019. If the S&P 500 reaches those levels, it will be a new all-time high for the equity index.

Read Wells Fargo: Top Picks amid Recent Turmoil and Goldman Sachs: The Best Way to Beat the Trade War to know about best picks by these investment bankers. Besides, Goldman Sachs expects high volatility this month.


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