Bank of America has raised its year-end price target for the S&P 500 (^GSPC) from 5,000 to 5,400, while Wall Street generally remains hesitant on inflation risks. Yahoo Finance Markets Reporter Josh Schafer breaks down the BofA note published by strategist Savita Subramanian's team.

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Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

JOSH SCHAFER: Hey, Seana. Yes, Bank of America coming out and raising that target for the S&P 500 moving the year end target to 5,400. That's up from a previous call of 5,000. They're really the fifth firm that we follow at Yahoo Finance over the last month that has moved up their target on the S&P 500. So this has been a clear trend here.

Bank of America's call for 5,400 now sitting atop among the different targets that we track here in line with UBS also sitting at 5,400 in a pretty similar call here to what other strategists are saying Bank of America has had a positive outlook on earnings. They feel like earnings are on the upswing here, and earnings are going to continue to do well.

Also should note Bank of America's economics team, what the strategy team relies on to understand what's going to happen in the economy, came out last week and said they now think first-quarter GDP-- sorry-- 2024 GDP is going to be better than they initially expected.

So guys, the overall call here is just better economy than maybe we thought earnings, doing well, that's a pretty solid backdrop to own stocks. Also, I should just mention we have the S&P above 51,000. So at some point, people got to move up target.

BRAD SMITH: Is there one clear outperformer that they're also putting out there with this target update as well here?

JOSH SCHAFER: I wouldn't say there was a clear necessarily outperformer that I saw in here, Brad. One thing that I did think was interesting was just taking a look at what they call euphoria, right. And that's one of the biggest parts of these calls we're seeing right now is, have we reached euphoria? Bank of America saying bull markets end with that euphoria, and we're not there yet.

Sentiment has improved but areas of euphoria are limited. They highlighted AI and GLP-1 as maybe areas we're starting to see euphoria but not necessarily maybe we're all the way there. And they essentially said they feel like we're going to be in a more euphoric moment when areas outside of AI and GLP-1 start contributing. And we see valuations as a whole rise, which is something we're seeing a lot of people highlighting right now.