Wall Street is learning what was already known to people who move to Florida only to end up hating the humidity and the big bugs: The grass is always greener on the other side.
Case in point: Analysts at both Goldman Sachs and Bank of America this week have become the latest to raise their end-of-year target forecasts for the S&P 500. Consider it a sign that the great rotation out of US equities earlier this year amid trade war fears may have been an overcorrection.
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While the so-called TACO Trade may be the hottest acronym on Wall Street and in financial publications this year, a much more storied — and somewhat related — trader acronym is back in fashion, too: TINA. That’s “There Is No Alternative [to US equities],” for the uninitiated. The TINA trade has nonetheless hit some snags in recent years, with bonds looking like a pretty swell alternative in an era of high interest rates. But this year’s trade war has made the bond market a bit yippy, to borrow a phrase. Meanwhile, talk of the end of American Exceptionalism, as evidenced by a turn toward Europe and elsewhere, may have been slightly exaggerated. As the trade war simmered, the S&P 500’s monthly traded value in June ($2.3 trillion) more than tripled that of the Stoxx Europe 600 index ($600 billion), according to a recent Bloomberg analysis, as the index rose to a record high.
Last month, Goldman Sachs chief US equity strategist David Kostin even declared the “TINA trade remains alive and well” — driven by retirement accounts and retail trading, as US households on an epic dip-buying spree have committed a record 49% of their financial assets this year to equities. The bank’s upgraded year-end outlook, published late Monday and followed by a similar revision at BofA the next day, adds to a choir of increasingly upbeat voices:
BofA raised its forecast from 5,600 to 6,300, while Goldman’s target increased from 6,100 to 6,600; Citigroup, Barclays and Deutsche Bank raised their outlooks in June. Most major brokerages dropped their year-end projections to below 6,000 following April’s Liberation Day trade-war rumblings.
In its note, Goldman cited recent inflation data and corporate surveys that showed less tariff pass-through than expected, as well as the likelihood of interest rate cuts to come.
Made From Pure Concentrate: June’s market rally and the return of the TINA trade have not, exactly, been all that kumbaya in practice — a possible tell that the enthusiasm may now be running a little hot. At least that’s the thesis of a recent study from analysts at Bloomberg Intelligence, who found that just 10% of stocks on the S&P 500 are powering the index’s returns since its April lows, well down from the 22% average from 2010 to 2024. Meanwhile, the S&P 500 Equal Weight Index hasn’t hit a record high since November. Analysts at Oppenheimer & Co. are registering similar concerns, recently telling Bloomberg: “Broader participation is important. Rallies with most stocks participating, both large and small, are the rallies that typically continue.”
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