The stock could rocket up by the end of the year. A Bank of America strategist has identified six possible positive scenarios that could catapult stock markets higher.

Equity markets have already posted impressive gains of around 8% this year (S&P 500 +8.56%), but could make even bigger gains by the end of the year if any of the positive surprises occur. In his analysis, Bank of America strategist Michael Hartnett presented six potential positive surprises that could shoot the stock markets up further. This is due to the prevailing pessimism among many investors, including hedge funds, which currently hold the largest short positions against the S&P 500 index since 2011.

Moreover, this bearish stance comes at a time when investors are further increasing their cash reserves through money market funds, which now stand at a record $5 trillion.

"Bearish sentiment, along with $5 trillion in cash, still represent 'best friends forever' for risk assets, especially equities," Hartnett said. These are six positive surprises that Bank of America believes could support further growth in equity markets this year.

Here are 6 possible positive scenarios that could kickstart a bull market 👇

1. "The Russia/Ukraine/NATO war is over."

An end to the Russia/Ukraine conflict should help calm geopolitical tensions and ease supply chain concerns related to certain commodities.

2. "Immigration + ChatGPT = back to disinflation."

The surge in U.S. immigration and ChatGPT's ability to save time on certain tasks are deflationary forces that, when combined, could help depress inflation. Such a drop in inflation would pave the way for the Federal Reserve to back off from raising interest rates.

3. "An arms race in technology spending."

With ChatGPT making all sorts of noise, many tech companies will be spending money to make up for the delay, and that would be good news for the economy.

4. "New fiscal culture of 'bailouts' = no recession."

Both sides of the aisle in Congress tend to spend a lot of money when there's a big economic shock, so what's stopping them from doing the same in the future?

5. "Why sell when politicians panic so easily."

It's not just Congress that will do everything in its power to soften the blow of an economic downturn. The Federal Reserve also has powerful tools through interest rate cuts and bond buying programs to try to stimulate the economy.

6. "Stocks are less dangerous than bonds."

If stocks are again viewed as a better alternative than bonds, it could trigger a wave of inflows into the asset class.

If any of these surprises play out, it could help the economy avoid a recession or see a soft landing rather than a hard landing, according to Hartnett, which would ultimately boost the stock market.

But there are still risks that prevent investors from going all-in on stocks. Those risks include a hard landing for the economy, a credit event in shadow banking and potential conflict between China, Taiwan and the U.S., Hartnett said.

In order to gauge whether the economy is signaling that a hard or soft landing (or no landing at all) is ahead, Hartnett recommends investors monitor price action in high-yield bonds, homebuilder stocks and the semiconductor index.

If the iShares High Yield Bond ETF (HYG) is trading above 73, the SPDR Homebuilders ETF (XHB) is trading above 70 and the Philadelphia Semiconductor Index (SOX) is trading above 2,900, it signals that a soft landing or no recession at all is in play, and vice versa if these assets are trading below these levels.

So far, two of these three signals indicate a positive economy ahead, with the High Yield ETF trading at $75.15 on Friday and the Semiconductor Index trading at 3,056. Meanwhile, the Homebuilder ETF is trading at $67.

• What do you think? Do you think we could see more growth in 2023?

Please note that this is not financial advice.