Bank of America: Rising oil prices have a greater impact on U.S. GDP than on the S&P 500

Investing.com - Bank of America said that rising oil prices are a bigger drag on the U.S. economy than on corporate earnings. The bank cut its economic growth outlook but kept its S&P 500 earnings estimates unchanged.

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Bank of America’s economists lowered their 2026 U.S. real GDP forecast from 2.8% to 2.3%, citing high crude oil prices. However, the bank believes the damage to corporate profits should be limited.

“Rising oil prices are a negative for some industries, but energy costs account for a relatively small share of total operating costs across the S&P 500,” strategists said. The bank maintained its S&P 500 earnings forecast at $310, implying year-over-year growth of 13%.

On market sentiment, Bank of America said that its sell-side indicator (SSI), which tracks the average recommended stock allocation by Wall Street strategists, fell from 56% in March to 55.7%—the first decline in more than six months.

This shift occurred as geopolitical factors drove the S&P 500 down 5%, delivering the worst monthly performance in a year. The 30-basis-point drop was about one-fifth of the decline after the tariff announcement in April 2025.

Despite the pullback, the indicator remains closer to a “sell” signal than a “buy” signal—1.9 percentage points away from the former and 4.4 percentage points away from the latter. Previously, the market peak typically saw the indicator rise to above 59%. Bank of America said, based on the current level, the indicator implies a 12.5% price return for the S&P 500 over the next 12 months.

The S&P 500’s 2026 earnings forecast rose 2% in March, lifting the market consensus growth expectation to 17% year over year. The S&P 500’s forward P/E ratio is currently about 15% lower than its peak at the end of October.

“Our forecast for the S&P 500 year-end target level of 7100 now implies a 9% above-average price return from the current level, while our initial outlook was more moderate,” Bank of America strategists said.

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