Bank of America Says Stocks Have Been ‘Overdue' For a Pullback, After a Slow Start to September

Stocks are off to a weak start this month, and one group of experts sees them dropping further. Bank of America analysts told clients in a note yesterday that they now expect the S&P 500 to fall to 7,400 by the end of the year, above their previous target of 7,100 but still representing downside of about 2% from the index’s closing level Tuesday. Their 12-month target at 7,800 would suggest upside of just 3%. “We are entering a seasonally weak period and in our view are overdue for a pullback,” the analysts wrote, noting that the S&P 500 has had just one 5% pullback this year, amid the early stages of the Iran war in March, while the typical year has three or more. The index also tends to experience a correction of 10% or more once a year, they wrote, though it hasn’t seen one since last spring’s market turmoil over the Trump administration’s tariffs. The analysts said they are still bullish on the outlook for markets in the longer term, amid a solid consumer and jobs environment, but cited stubborn inflation and expectations of interest rate hikes as several reasons to be cautious in the near term. There also isn’t much historical reason for near-term optimism, the analysts wrote, as markets are only partly through what tends to be their weakest stretch in September and October. Those inflation and rate hike concerns, along with uncertainty around the trajectory of AI, have weighed on markets recently. The S&P 500 is down about 1% in September far, and around 3% off last month’s record high, though it’s still added 11% since the year began.