-
According to Bank of America, the stock market is poised to hit 2023 highs by the end of the year.
-
The bank said the leading bond market indicator had made a big sign for the stock market.
-
“Constructive credit markets entering September support the case for severe current conditions,” BofA said.
The bond market reflected signs that the stock market will hit a new 2023 high by the end of the year, according to a note on Tuesday from Bank of America.
The bank highlighted earlier this month that Bloomberg’s average option-adjusted spread for U.S. corporate high yields hit a new year-to-date low, meaning bond investors are growing more comfortable buying riskier debt.
That’s a leading indicator for the stock market because bond investors are prime movers in the market, which can cause equity pain about some macro event. And when bond investors panic, they demand higher yields for the debt they buy.
But this is not happening. Instead, the high-yield OAS is around 3.7, the lowest level since early 2022.
“This is a bullish leading indicator at risk, which is at the latest New Year’s-to-date highs. S&P 500According to Suttmeyer, the developing credit markets entering September will highlight the issue and support the case for the current trends we have described.
The S&P 500 was It hit a year-to-date high of 4,607 on July 27, which means the stock market should rise at least 3.1% from current levels.
What makes the market higher, Sutmeyer also pointed out “Mountain of Money” In the form of a $5.62 trillion money market fund, it helped fuel a year-end rally in stocks as investors weighed in on a risk-free return of just 5%, while the S&P 500 returned nearly 17% year-to-date.
“Because the S&P 500 can continue [to] Growth after strong returns [the] We wouldn’t be surprised to see investors put cash to work in the first half and into August, and rally at the end of the year.
Also of interest and potential upside for the stock market is that defensive sectors such as utilities and consumer staples are falling and breaking support levels. When the broader market falls, investors often buy these defensive stocks for safety, so this is a very dangerous sign, according to Suttmeyer.
Read the main article Business Insider
