Improving S&P 500 Outlook Signals Revival of TINA Trade

Wall Street is learning what was already known to people who move to Florida only to end up hating the humidity and the big bugs: The grass is always greener on the other side.

Case in point: Analysts at both Goldman Sachs and Bank of America this week have become the latest to raise their end-of-year target forecasts for the S&P 500. Consider it a sign that the great rotation out of US equities earlier this year amid trade war fears may have been an overcorrection.

Party in the USA

While the so-called TACO Trade may be the hottest acronym on Wall Street and in financial publications this year, a much more storied — and somewhat related — trader acronym is back in fashion, too: TINA. That’s “There Is No Alternative [to US equities],” for the uninitiated. The TINA trade has nonetheless hit some snags in recent years, with bonds looking like a pretty swell alternative in an era of high interest rates. But this year’s trade war has made the bond market a bit yippy, to borrow a phrase. Meanwhile, talk of the end of American Exceptionalism, as evidenced by a turn toward Europe and elsewhere, may have been slightly exaggerated. As the trade war simmered, the S&P 500’s monthly traded value in June ($2.3 trillion) more than tripled that of the Stoxx Europe 600 index ($600 billion), according to a recent Bloomberg analysis, as the index rose to a record high. 

Last month, Goldman Sachs chief US equity strategist David Kostin even declared the “TINA trade remains alive and well” — driven by retirement accounts and retail trading, as US households on an epic dip-buying spree have committed a record 49% of their financial assets this year to equities. The bank’s upgraded year-end outlook, published late Monday and followed by a similar revision at BofA the next day, adds to a choir of increasingly upbeat voices:

• BofA raised its forecast from 5,600 to 6,300, while Goldman’s target increased from 6,100 to 6,600; Citigroup, Barclays and Deutsche Bank raised their outlooks in June. Most major brokerages dropped their year-end projections to below 6,000 following April’s Liberation Day trade-war rumblings. 
• In its note, Goldman cited recent inflation data and corporate surveys that showed less tariff pass-through than expected, as well as the likelihood of interest rate cuts to come.

Made From Pure Concentrate: June’s market rally and the return of the TINA trade have not, exactly, been all that kumbaya in practice — a possible tell that the enthusiasm may now be running a little hot. At least that’s the thesis of a recent study from analysts at Bloomberg Intelligence, who found that just 10% of stocks on the S&P 500 are powering the index’s returns since its April lows, well down from the 22% average from 2010 to 2024. Meanwhile, the S&P 500 Equal Weight Index hasn’t hit a record high since November. Analysts at Oppenheimer & Co. are registering similar concerns, recently telling Bloomberg: “Broader participation is important. Rallies with most stocks participating, both large and small, are the rallies that typically continue.”