The
first-half
rally
for
stocks
in
2023
is
supported
by
fundamentals
and
still
has
upside
remaining,
according
to
one
of
Wall
Street’s
top
strategists.
In
a
note
to
clients
on
Sunday,
Bank
of
America
strategist
Savita
Subramanian
hiked
her
year-end
price
target
for
the
S
&
P
500
to
4,300
from
4,000.
The
new
target
is
about
2.6%
above
where
the
index
closed
on
Friday.
The
S
&
P
500
is
already
up
more
than
9%
year-to-date.
.SPX
YTD
line
The
S
&
P
500
has
gained
more
than
9%
in
2023.
The
gain
for
stocks
this
year
has
come
despite
stubbornly
high
inflation
and
signs
of
a
potential
recession
coming
later
in
the
year.
However,
Subramanian
said
that
investors
should
take
note
of
structural
shifts
at
major
companies,
including
the
potential
of
artificial
intelligence
to
improve
efficiency.
“The
era
of
easy
money
is
behind
us,
but
that
might
be
a
good
thing.
Over
the
past
few
decades
we
have
enjoyed
financially
engineered
growth:
cheap
financing,
buybacks
and
cost-cutting,”
Subramanian
wrote.
“Today,
Corporate
America
has
shifted
focus
to
structural
benefits
–
efficiency/automation/AI
and
have
bought
themselves
time
to
adapt
via
long-dated
fixed
rate
debt.
Old
economy
cyclicals,
capital-starved
since
2008,
have
become
disciplined
and
self-sufficient,
evidenced
by
lower
betas
and
more
stable
earnings.”
Those
shifts
mean
that
stocks
are
not
overpriced
despite
surprisingly
high
valuation
multiples,
Subramanian
argued.
“Current
valuations
are
not
low,
but
rarely
are
low
during
profits
recessions.
On
cyclically
adjusted
earnings,
valuations
argue
for
price
returns
of
5%
per
year
for
the
S
&
P
500
over
the
next
decade
–
better
than
the
negative
returns
yield
by
valuation
signals
at
the
beginning
of
last
year,”
Subramanian
said.
The
new
target
puts
Bank
of
America
above
the
average
in
the
CNBC
Market
Strategist
Survey
.
The
highest
target
among
major
Wall
Street
firms
is
still
4,575
from
CFRA’s
Sam
Stovall.
—
CNBC’s
Michael
Bloom
contributed
reporting.