Recently, Bank of America released a market outlook report, pointing out that its closely tracked "Sell Side Indicator" (SSI) slightly decreased from 55.7% to 55.5% in August. Although it remains within the "neutral" range, it signals a positive development worth noting. As a contrarian sentiment indicator reflecting the recommended equity allocation ratio by Wall Street analysts, the SSI has accurately predicted market turning points multiple times in history—issuing warnings when the market becomes overly greedy and hinting at opportunities during times of panic. Although the current reading is still above its 15-year long-term average, Bank of America believes this level suggests the S&P 500 could achieve approximately a 13% price return over the next 12 months, indicating that the market still possesses robust upside potential under the current macroeconomic environment.
I. Overall Market Outlook: Contrarian Indicator Suggests Stocks Have Not Yet Peaked
Addressing the debate over whether U.S. stocks are overvalued, Bank of America used the SSI, a contrarian analysis tool, to make its judgment. The indicator declined in August for the first time since April, albeit by only 0.2 percentage points, indicating that analyst sentiment has not reached extreme optimism. The current SSI still has some distance from the 57.8% threshold that would signal a "sell," while it is relatively closer to the 51.3% "buy signal" level. Bank of America emphasized in the report that even though the indicator is above its long-term average, the stock market still has upward momentum. This judgment supports the view that "the market has not entered a state of frenzy, and there is no need to rush to exit in the short term," providing investors with confidence to hold positions amid uncertainty.
II. Technology Sector: Judicial Rulings Bring Structural Benefits, Enterprise Market Becomes a Breakthrough Point
Technology giants have demonstrated strong resilience amid policy and market competition. Bank of America's report highlighted that the recent judicial antitrust rulings against Google and Apple had a lower-than-expected practical impact. Although Google is prohibited from signing "exclusive pre-installation agreements," it can still maintain its default search engine status by paying fees. Given the significantly higher profitability of its search business, partners are still inclined to maintain existing collaborations, and core business revenue is expected to remain stable.
Apple also benefits from the ruling. Approximately 22% of its service revenue comes from the "default search fee" paid by Google, and the ruling did not mandate Apple to provide a search engine selection interface. Thus, this "passive income" remains unaffected. Based on this, Bank of America raised Apple's target stock price to $260, affirming the sustained growth potential of its service business.
On the other hand, cryptocurrency exchange Coinbase shows a clear divergence in its business segments. Its institutional services business is progressing smoothly, with partnerships already established with over 240 companies, including PayPal and Stripe. It has launched the blockchain platform "Base" and manages approximately $12 billion in assets, demonstrating a leading position in compliant digital asset services. However, in the retail segment, Coinbase still faces intense competition from platforms like Binance, which attract a large number of retail investors with high leverage and relaxed identity verification mechanisms. Bank of America assigned Coinbase a "neutral" rating, emphasizing that its institutional business expansion should be closely watched as a potential new growth driver.
III. Healthcare Sector: GLP-1 Drug Prices Stabilize, Lilly’s Leading Position Remains Secure
This year, GLP-1 weight-loss drugs, represented by Lilly’s Tirzepatide and Novo Nordisk’s Semaglutide, have experienced significant stock price volatility, with widespread market concerns about their ability to maintain pricing. However, Bank of America believes the pricing environment for these drugs is more stable than pessimistic expectations suggest. The GLP-1 market currently exhibits a "duopoly" structure, with generic versions unlikely to enter until at least 2032, ensuring a favorable competitive landscape. Additionally, Bank of America anticipates that the upcoming ICER cost-effectiveness assessment report in October may overturn the previous narrative that these drugs offer "poor cost-effectiveness," thereby encouraging insurers to expand coverage and boost overall sales.
Based on this judgment, Bank of America maintains a "buy" rating for Lilly, with a target price of $900. The report notes that Lilly continues to hold a leadership position in obesity treatment, growing faster than its peers, and its current valuation level remains reasonable.
IV. Energy Innovation: Small Modular Reactors (SMRs) Could Become a Trillion-Dollar Opportunity
Beyond traditional energy transitions, Bank of America’s report specifically highlights the significant potential of small modular reactors (SMRs) as an emerging sector. SMRs, hailed as "portable mini nuclear power plants," offer advantages such as flexible deployment and the ability to reuse existing coal power plant facilities. Predictions indicate that by 2050, U.S. SMR capacity could reach 343 gigawatts, accounting for approximately one-quarter of the current grid’s total capacity, with corresponding investment exceeding $1 trillion.
Bank of America advises investors to focus on three short-term catalysts: rapid growth in data center construction spending, capital expenditure plans of hyperscale tech companies like Amazon and Google, and customer signing activities. At the individual stock level, Oklo is recommended with a target price of $92, acknowledging its cost control capabilities and 14 GW of意向 orders. NuScale, however, retains a "neutral" rating due to its slightly slower customer advancement.
V. Undervalued Potential in Bank Stocks: Huntington Bancshares Worth Watching
Amid the overall sluggish banking sector, Bank of America identifies regional bank Huntington Bancshares as having excess growth potential, assigning it a "buy" rating with a target price of $20. The bank has a stable business in the Midwest while actively expanding into the Southeast, maintaining steady loan growth. Its net interest margin is expected to remain above 3.2%, and it continues to advance an annual cost-saving plan of 1%. Additionally, management has clearly stated that it will not pursue large-scale mergers and acquisitions for now, focusing instead on organic growth and reducing operational uncertainty. Its current price-to-earnings ratio of 11x does not fully reflect its growth prospects, leaving room for valuation recovery.
VI. Consumption Trends: Structural Recovery, Small-Ticket Spending Continues to Outperform Large Expenditures
Through credit card spending data, Bank of America observes that the U.S. consumption market is exhibiting characteristics of "weak recovery, strong divergence." In the last week of August, credit card spending increased by 2.8% year-over-year, and after adjusting for holiday effects, it still grew by 1.9%, indicating a recovery in consumer sentiment in the third quarter. By category, online electronics sales grew by 11.2%, apparel by 3.2%, and groceries by 1.5%, while spending on home improvement, airlines, and hotels declined by 8.3%, 4.3%, and 1.9%, respectively. This reflects consumers’ continued preference for "small-ticket items" and caution toward large expenditures.
Conclusion: Opportunities Remain, Selective Allocation Is Key
Bank of America’s entire report conveys a clear message: Despite market uncertainties, U.S. stocks still possess upward momentum, and the S&P 500 is expected to achieve double-digit gains over the next 12 months. Investors should focus on technology stocks like Apple and Google, which are supported by favorable policies; opportunities in the SMR-related industrial chain within the energy sector; the long-term potential of Lilly in the healthcare sector; and undervalued regional bank stocks. The market always offers structural opportunities, and the current key is: selection outweighs timing.
