Bank of America has turned more cautious on U.S. equities, predicting only modest gains for the S&P 500 through 2026. The bank sees the index rising to around 7,100, roughly a 5% increase, as stretched valuations are likely to compress even as earnings continue to grow. BofA expects profits to rise about 14% but notes that liquidity tailwinds are ebbing due to softer buyback activity, heavier capital-expenditure plans and limited room for further central-bank easing.
The forecast includes a wide potential trading range of 5,500 to 8,500, underscoring elevated uncertainty. BofA also expects a shift in market leadership, favouring capex-driven sectors and blue-collar themes over consumption and white-collar exposure. The bank upgraded Staples to Overweight and cut Consumer Discretionary. On AI, it warns that monetisation may prove slower than hoped and that the industry faces near-term constraints, including surging power requirements.
