by Sagarika Jaisinghani
Investors are counting on US stocks to rally on the back of a robust corporate earnings season, before the market loses steam toward year-end, according to Bank of America Corp. strategists.
Client feedback suggests “no one” is worried about the economy or equity valuations, strategist Michael Hartnett wrote in a note. A majority of them expect a forecast-beating second-quarter reporting season and for companies to pledge higher spending on artificial intelligence.
Trading consensus is for more gains in the S&P 500 Index into the Federal Reserve’s annual economic symposium in Jackson Hole in late August, Hartnett said. That is likely to be followed by a “healthy ‘back’n’fill’ correction.”
US stocks have surged 26% from an April low after President Donald Trump paused some tariffs. The S&P 500 is back at record highs, also driven by resilient economic growth, but the benchmark is still trailing international peers this year.
Focus next week will shift to the earnings season. Analysts expect S&P 500 profits to rise 2.8% year over year, a sharp slowdown after a 14% jump in the previous quarter, according to data compiled by Bloomberg Intelligence.
Traders at Goldman Sachs Group Inc. have also said they expect further gains in the US benchmark before the rally fades into August.
Meanwhile, tariff-driven volatility has settled in the last few weeks amid America’s trade negotiations with key partners. Hartnett said BofA’s equity and credit clients are betting on the so-called TACO trade, an acronym that stands for “Trump Always Chickens Out.”
Copyright Bloomberg News
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