The Zhitong Finance App learned that Wall Street analysts believe that in 2027, the S&P 500 index may be difficult to support the market to go long.
Savita Subramanian, head of US equities and quantitative strategy at Bank of America, said on the program: “We are not particularly optimistic about this index. I think the index itself has some risks. Another thing that worries me is that in the past 30 or 40 years, the S&P index has recorded a net inflow of capital every year, and we have never experienced a market environment where there is a net outflow of capital from the index. So I have some concerns about this, because investors are now quite saturated with stocks in all kinds of assets. Look at individual investors, look at asset owners, what is the most crowded stock symbol in the world? It's the S&P 500 Index.”
Overall, this year has been pretty good for investors, although sometimes that doesn't seem like it.
The year was marked by sharp shocks: the US-Iran war triggered aggressive oil price shocks, pushed crude oil above $100 per barrel, and reignited stubborn overall inflation.
To counter continued price pressure (as shown by the October CPI data released today), Federal Reserve Chairman Kevin Walsh initiated the first rate hike of the current cycle in September, raising the policy interest rate to 3.75% to 4%. Today, calls for the Federal Reserve to raise interest rates by 50 basis points at the last policy meeting in December are on the rise.
Meanwhile, the unprecedented boom in artificial intelligence drove tech stock valuations and capital expenditure of hyperscale cloud vendors into a state of overdrive in the first half of the year. This excitement quickly turned to a sharp collapse in the fall: the slowdown in data center approvals, changes in the pattern brought about by Election Day, and soaring debt financing costs triggered a sharp reduction in valuation multiples and historic sell-off for chipmakers and new cloud vendors.
The S&P 500 index rose 9.5% during the year, outperforming the 8.5% increase in the Dow Jones Industrial Average and the 7.5% increase in the Nasdaq Composite Index.
Subramanian warned, “So if you need to raise capital to meet revenue obligations or something, I think that's where capital outflows can become interesting. It was there that we saw some risk in the argument that the 'S&P 500 will only keep going up'.”