Bank of America Cuts S&P 500 Estimate by 9% After 6-Week Slide

  • Strategist Subramanian sees second year of losses for index
  • `Extreme' tumble so far makes prior target unattainable

Bank of America branch in New York.

Photographer: John Taggart/Bloomberg

Add Bank of America to the list.

The firm’s research team is the latest on Wall Street to lower expectations for the U.S. stock market in 2016, after one of the worst starts to a year on record wiped out more than $2 trillion in value. The bank now expects the Standard & Poor’s 500 Index to end the year at 2,000. The gauge rose 1.7 percent to 1,859.28 at 2:30 p.m. in New York, trimming its decline in 2016 to 9 percent.

While the bank’s new target implies a 7.7 percent advance from the current level, it’s 9 percent lower than the prior target of 2,200. It also implies that the gauge will fall for two consecutive years for the first time since the dot-com era.

“Unless we see signs of a growth recovery, there may be significant near-term downside to current levels,” the group, led by Savita Subramanian, wrote in a note to clients Friday. “The S&P 500’s move this year has been extreme, worsened by the dearth of liquidity in financial markets amid the tightest regulatory backdrop of our careers. This lack of liquidity could exacerbate downside risk potential.” 

Wall Street strategists are losing their resolve to project big gains in the stock market as everything from China to oil and interest rates roil markets. The handful of cuts has reduced the average annual estimate, the first time that’s happened this early in a year since the Iraq war in 2003.

Subramanian is now the eighth strategist of 21 followed by Bloomberg to reduce a forecast this year. The new level leaves her as the least-bullish in the survey along with JPMorgan Chase & Co.’s Dubravko Lakos-Bujas. The 2,000 target is 8 percent below the median of 2,175.

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