Here are 6 bullish surprises that could power the stock market through the rest of this year, according to Bank of America

Matthew Fox

Fri, Apr 14, 2023, 11:55 AM 3 min read

There are six potential bull market surprises that could drive stocks higher, according to Bank of America.
The bank highlighted the deflationary impact of ChatGPT and a potential end to the Russia-Ukraine war.
"Bearish sentiment + $5 trillion of cash [is] still the 'best friends forever' for risk assets, especially stocks," BofA said.

The stock market has already staged an impressive year-to-date rally of about 8%, but those gains could balloon by the end of the year if one of Bank of America's bullish surprises plays out.

In a Thursday note, Bank of America's investment strategist Michael Hartnett outlined the six potential bullish surprises that could jolt the stock market higher as pessimism remains prevalent among a large swath of investors, including hedge funds, which have built up their largest short position against the S&P 500 since 2011.

That bearish positioning also comes as investors continue to build up their cash positions via money market funds, which now tops a record $5 trillion.

"Bearish sentiment + $5 trillion of cash [is] still the 'best friends forever' for risk assets, especially stocks," Hartnett said.

These are the six bullish surprises that could fuel more upside in the stock market this year, according to BofA.

1. "Russia/Ukraine/NATO war ends."

An end to the Russia-Ukraine conflict should help calm down geopolitical tensions and ease supply chain concerns related to certain commodities.

2. "Immigration + ChatGPT = back to disinflation."

An increase in immigration in the US and ChatGPT's ability to save time for certain tasks are both deflationary forces that when combined could help squash inflation. Such a decline in inflation would pave the way for the Federal Reserve to back off its interest rate hikes.

3. "Arms race in tech spending."

As ChatGPT makes waves, many technology companies will be spending money to play catch-up, and that would be good news for the economy.

4. "New fiscal 'bailout' culture = no recession."

Both sides of the aisle in Congress have a tendency to spend a lot of money when a big economic shock occurs, so what's stopping them from doing the same thing in the future?

5. "Why sell when policy makers panic so easily."

It's not only Congress that will do everything in their power to dent the blow of an economic downturn. The Federal Reserve also has powerful tools via interest rate cuts and bond buying programs to try and stimulate the economy.