Stock Market to Get Major Boost From America’s Manufacturing Revival: BofA

• America’s manufacturing sector is poised for a rebound in 2025, according to Bank of America.
• That’s bullish for the S&P 500, which derives a high percentage of earnings from the sector.
• The bank predicted that manufacturing activity could expand as soon as April this year.

America’s manufacturing sector is poised to get a lift this year, a development that could give a boost to the broader stock market, according to Bank of America Securities strategist Ohsung Kwon.

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Speaking to CNBC on Thursday, Kwon issued a bullish outlook for stocks, pointing to a potential catalyst for equities in the US manufacturing space.

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Manufacturing activity has contracted in 2024, and for most of the last two years, according to the Institute for Supply Management.

But the sector is expected to see a revival, Kwon said, which he thinks could rev up earnings growth and boost stock prices.

“The reason why that matters so much for equities is because half of earnings for the S&P 500 is tied to the manufacturing cycle. It’s been the longest downturn in history for manufacturing,” he added.

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In a December note, Bank of America strategists said they foresaw the Purchasing Managers Index, a measure of manufacturing activity, starting to expand in April of this year. The strategists pointed to positive indicators in the sector, like improving small business optimism and industrial companies reporting that they had orders on the books for 2025.

Donald Trump’s second term in office is also expected to boost manufacturing. The new administration is expected to push policies that will support activity in the sector, while reshoring—the practice of companies bringing their production back to the US—will also likely rise over the next four years, the bank added.

“Best case, I think it’s going to be a major boost for earnings for [the] average stock, and I think that’s going to be a major driver for the market broadening out,” Kwon said, though he foresaw “more juice” in cyclical areas of the market, like financial, consumer discretionary, and materials stocks.

Bank of America remains bullish on stocks, though strategists are expecting more muted returns this year compared to 2024. The bank is forecasting the S&P 500 will end the year at 6,666, implying 14% upside from the benchmark index’s current levels.