Bank of America Corp Forecasts No Recession Until 2027 (If Ever), Sees S&P At 3,500 In 10 Years

But if you think that is amusing read the following from another BofA prognosticator, its “Equity & Quant Strategist” Savita Subramanian. This is presented without comment.

S&P 500 targets: 2200 in 2016 and 3500 by 2025

We expect modest gains for US large cap stocks in 2016: the likelihood of a recession in the next 12 months is low in our view, but valuations have normalized from previously low levels and narrowing returns are to be expected. Our forecast represents a 5% rise from current levels, roughly equivalent to earnings growth, where we forecast 2016 EPS of $125.

10-year S&P 500 forecast: 3500 (+67%)

Our work suggests that valuation is a poor short-term timing indicator, but the single most important determinant of long-term returns. Valuations have historically explained 60-90% of subsequent returns over a 10-year time horizon – see Table 2. Normalized P/E – our preferred valuation metric – has explained 80-90% of returns over the subsequent 10-11 years.

Based on current valuations, a regression analysis suggests compounded annual returns of 8% over the next 10 years with a 90% confidence interval of 4-12% (Table 2). While this is below the average returns of 10% over the last 50 years, asset allocation is a zero-sum game. Against a backdrop of slow growth and shrinking liquidity, 8% is compelling in our view. With a 2% dividend yield, we think the S&P 500 will reach 3500 over the next 10 years, implying annual price returns of 6% per year.

So… no recession until 2027, if ever, and S&P at 3500 by 2025.

Great, just one thing we would like to know: does Bank of America anticipate another bailout of Bank of America during this upcoming golden age a la 2008, or is that also impossible to predict.

This article is brought to you courtesy of Tyler Durden From Zero Hedge.

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