Barclays says US stocks were still expensive, saying the S&P 500 had to drop to 3,724

Per Business Insider

Barclays says that US stocks remained too expensive as it shared its targets for the S&P 500. Despite already dropping from its 2023 heights, the bank said that it expects the S&P 500 to drop to 3,724.

Barclays head of US equities strategy, Venu Krishna, shared a statement regarding how they think of the equity markets. They said they increased hawkish expectations regarding how the Feds deal with rates.

Krishna: "[We] continue to believe that equity markets are trading too rich relative to most outcomes, particularly after accounting for stickier-than-expected inflation and more hawkish expectations for the Fed rate path, which should place both earnings and valuations squarely at risk,"

The head of Barclays' US equities strategy says that out of the S&P 500, 40% of them were higher than their 10-year median. Krishna said that the higher prices happened despite inflation and higher interest rates.

Krishna: "[Yet] equities insist on looking through to a full reversion of price pressures to pre-COVID levels, a dynamic that we see as increasingly unlikely in the near term,"

The Bank of America says that the Fed would be forced to bail out the US government before a bull run could take place. The bank referred to the $31 trillion debt that the government had.

BofA expected that for the next ten years, the US government debt was expected to increase by over $21 trillion. Bank of America's Michael Hartnett shared how the US Federal deficit was up to 6.1% of GDP.

Morgan Stanley recently warned that the 2023 stock rally was actually a "bull trap," with its chief US equity strategist Mike Wilson sharing how March was a month of "high risk."

Morgan Stanley maintained that March was a month of "high risk" despite the S&P 500 increasing by 9% in early February. The firm believes that a drop is still expected to come.

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