The head of U.S. equity and quantitative strategy at Bank of America Securities said that this year’s bull run from AI may not sustain next year.
- Subramanian expects only a 4% upside from current levels, despite considering a 15% earnings growth.
- She also expressed concerns about a liquidity squeeze and a decline in consumption due to potential job losses from AI.
- Subramanian’s outlook is by far the most bearish compared with others, such as Citi and Oppenheimer.
Bank of America Securities’ head of U.S. equity and quantitative strategy reportedly believes the S&P 500 will end 2026 at 7,100 — a mere 4% upside from current levels, despite a 15% earnings growth penciled in.
Savita Subramanian told CNBC in an interview that this year’s bull run is driven by AI jumps that may not sustain next year. “And the reason really is the stocks in the S&P right now that are the bulk of the market are not the economically sensitive companies,” she told CNBC. “They’re really the AI plays, the kind of buy-the-dream companies, and those we see as maybe headed for a little bit of an air pocket in 2026.”
Most of this year’s upside from artificial intelligence (AI) surges will result in “significant multiple compression” next year, she said.
Impact On Labor Market
Subramanian also expressed concerns about AI’s impact on the labor market, stating that more consumers will begin to suffer.
“Where we are now is a point where you really have to pick a side. So, either AI stocks are all that, but if that’s the case, they’re going to take a bunch of jobs away, which means the consumption could falter next year. So, you know, I worry about the idea that we’re just pricing in the best of everything right now,” she said.
Street Estimates
Meanwhile, other firms are more bullish on next year’s market performance. Citigroup expects the S&P 500 to end 2026 at 7,700, an implied gain of 12.7% from Friday’s close, citing strong corporate earnings and AI infrastructure build-out, as per a report from Reuters.
Another CNBC report said that Oppenheimer sees the S&P 500 surge 18% from Friday’s close to end 2026 at 8,100, while Wolfe Research predicts the index will climb to 7,600, an implied gain of 11%. Fundstrat Global Advisors’ Managing Partner Tom Lee sees the index reaching 7,700 by the end of next year. Lee also said that he expects the S&P 500 to close at 7,300 in December this year.
The SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down by 0.14% at the time of writing, and retail sentiment around it on Stocktwits was in the ‘bullish’ territory.
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