Investing.com -- In its latest technical outlook, Bank of America (NYSE:BAC) presented a wide range of outcomes for the S&P 500 in 2025, with year-end targets spanning from 5500 to 6500, depending on how key macro and market factors evolve.
The base case scenario suggests a modest gain of 0–5%, projecting the index at 5885–6175 by year-end, consistent with historical behavior during years ending in 5, which have ended higher 100% of the time.
In this base case, the market is expected to follow a pattern similar to 2015 and 2005, featuring drawdowns and recoveries but no repeat of the strong returns seen in 2023 and 2024.
Seasonal factors may play a role, with BofA highlighting April and May as potential rally months, while caution is warranted around the 5500–5512 support level. "Oversold sentiment helped 61.8% level hold (5500-5512). It must hold again for a bottom," BofA’s technical strategist Paul Ciana said in a note.
A more bullish path envisions the S&P 500 climbing as high as 6500 in the second or third quarter, echoing the 2018 "W" bottom and summer rally. This view is supported by several technical indicators, including stretched bearish sentiment and bullish signals from moving averages.
However, repeating the 2018 pattern also means a potential sell-off in the fourth quarter, Ciana cautioned.
“While 2015 and 2005 were flat, the next lowest return for a year ending in 5 was +9.06% (in 1965) which is SPX 6500,” he added.
Lastly, the bear case sees growing risks that could push the index back toward 5000, with a potential year-end recovery to 5500. Key warning signs include a possible double top in the S&P 500, weakening breadth, and bearish divergences in Dow Theory indicators.
Among the key concerns is the U.S. labor market, which BofA describes as “gradually weakening.” If the unemployment rate accelerates past 4.5%, it could trigger a “self-fulfilling ‘R’ word selloff to 5000,” Ciana warned.
The strategist also touched on yield curve dynamics, which could further complicate the outlook. A steepening curve, often a precursor to recession, has historically led to average corrections of 26.5%.