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According to Bank of America, the US manufacturing sector is poised to rebound in 2025.
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That’s bullish for the S&P 500, which derives a high percentage of earnings from the sector.
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The bank has predicted that construction activity may expand by April this year.
of America Construction sector According to Bank of America Securities strategist Ohsung Kwon, this year is set to get a lift, a development that could boost the broader stock market.
Speaking to CNBC on Thursday, Kwon issued a bullish outlook for stocks, pointing to a potential catalyst for equities in the US manufacturing space.
According to the Institute for Supply Management, manufacturing activity has contracted in 2024, and for much of the past two years.
But the sector is expected to revive, Kwon said, which he thinks could revive earnings growth and boost stock prices.
“The reason why it’s so important for equities is that half of earnings S&P 500 Linked to manufacturing cycle. This has been the longest recession in history for manufacturing,” he added.
In a December note, Bank of America strategists said their purchasing managers’ index, a measure of manufacturing activity, started to expand in April of this year. Strategists pointed to positive signs in the sector, such as improving small business optimism and industrial companies reporting they have orders on the books for 2025.
Donald Trump’s second term is also expected Boost construction. The new administration is expected to push forward policies that will support activity in the sector, while reshoring– companies’ practice of bringing their production back to the US – is likely to increase over the next four years as well, the bank added.
“Best case, I think it’s going to be a big boost to earnings [the] Average stocks, and I think that’s going to be a major driver for the market to expand,” Kwon said, though he already saw in “more juice.” circular Market sectors, such as financials, consumer discretionary, and material stocks.
Bank of America remains bullish on stocks, although strategists are expecting more muted returns this year than in 2024. The bank is predicting S&P 500 A 14% upside to the benchmark index from current levels would mean ending the year at 6,666.
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