Three months ago, SocGen’s Manish Kabra dethroned BofA’s Savita Subramanian to become Wall Street’s largest bull.

In a testament to the inexorable character of 2024’s US equity rally, Kabra’s upgraded price target was 5500 SPX. So, a mere 12 weeks ago, 5500 counted not only as bullish, but exceedingly so — enough to make Kabra the biggest optimist on the block.

Fast forward to the summer solstice and Kabra’s forecast isn’t the most bullish anymore. And the S&P briefly topped his year-end target last week (so, six months early) before pulling back.

In his latest, published this week, Kabra said US equities are at a “critical juncture.” If there’s a recession (the “downside risk”), stocks could plunge 25%. The bank doubts that’s in the offing, though, absent a resumption of Fed hikes. And Jerome Powell’s made it pretty clear that additional rate increases are unlikely.

The “upside risk” looks like the dot-com frenzy, only with better companies. “The AI ‘boom’ becomes a TMT-like bubble, driving the S&P to 6,666,” Kabra wrote, describing a hypothetical bout of irrational exuberance.

In that scenario, the index would trade at 24.7x the bank’s 2025 EPS estimate of $270.

Why 24.7x? Well, as the figure on the right (above) shows, that was the peak in March of 2000. Kabra called it “simple bubble math.”

Although rich on many metrics, the “Magnificent 7” actually isn’t the most expensive “sector” in the index as long as the group manages to meet expectations for 17% EPS growth over the next several years (see the figure on the right, below).

Skeptics would gently (or not-so-gently) suggest that’s an exercise in question begging: Part of what made the dot-com bust so brutal was the failure of the leadership to match expectations. If you assume today’s leadership will (match expectations), there’s not a lot to discuss.

If, however, some of the mega-caps are cyclicals masquerading as growth stocks, as Kabra’s colleague Albert Edwards would surely contend, the stage could be set for consensus to be disappointed in the event the economy rolls over.

For his part, Kabra’s watching initial claims for evidence of an impending downturn. “The best leading indicator that goes from green to yellow to red ahead of a US recession is jobless claims, which tend to rise [above] 300,000 three-to-six months before a downturn starts,” he said. Although claims are trending higher and recently hit levels last seen in August, 240,000 hardly counts as “high” historically.

Ultimately, Kabra isn’t in a hurry to reclaim the biggest bull title he briefly held in March. “We are in no rush to upgrade our index target any further at this stage and expect the market to see the next upleg with the first Fed rate cut which we see occurring in Q1 2025,” he wrote. “We will wait for more clarity on profit growth outside Tech before upgrading our target.”