Investors flock to the "old economy," and the U.S. stock market in this sector welcomes "perfect bullish" conditions

As American investors flock to the "old economy," strategists expect the S&P 500 index to rise another 10% next year, targeting 6666 points, with cyclical stocks set to experience "perfect conditions for a rally."

On Monday, Savita Subramanian, head of U.S. equity strategy at Bank of America, stated in an interview with CNBC that cyclical stocks are expected to deliver strong returns by 2025. She pointed out:

"Cyclical stocks typically perform well during periods of economic expansion, including sectors such as commodities, construction, and infrastructure. Now, investors are pouring into the 'old economy,' and these areas will see more upside potential."

Subramanian also noted that the equipment currently used by companies is not very efficient. Replacing them would make businesses more efficient, which requires spending on the old economy. In other words, to improve efficiency, infrastructure rebuilding is almost essential.

She believes that the economy is "ready" for a new round of spending cycles, creating perfect conditions for cyclical stocks to substantially outperform the market in the coming years.

Among cyclical stocks, Subramanian is particularly optimistic about the manufacturing sector. Although data from the Institute for Supply Management (ISM) shows that manufacturing has been in contraction for 24 of the past 25 months, she stated that factors such as the return of U.S. manufacturing, demand for grid construction and new infrastructure, as well as technology companies seeking to invest in artificial intelligence and data center construction, are all favorable for the development of manufacturing.

Subramanian said:

"Some tech companies have already revealed to Bank of America that they will invest heavily in technology, power, infrastructure, metals, and machinery over the next few years. I believe this is a huge boost for spending in manufacturing."

Not only Bank of America, but Morgan Stanley and Goldman Sachs are also optimistic about cyclical stocks, particularly in the financial sector. Morgan Stanley noted that the financial sector has outperformed other areas of the market, with the iShares S&P 500 Financials Sector UCITS ETF rising 36% this year, leading the benchmark index's 27% increase. Goldman Sachs also mentioned that hedge funds have been heavily buying cyclical stocks in the third quarter, with a focus on financial stocks