Farewell, 2020. Hello, 2021.
Based on analysts' ambitious year-end targets for the S&P 500 index, it looks forward and potentially upward for the US stock market in Superman style over the next year.
None of the stock market analysts MarketWatch interviewed for this report foresee a retreat from current levels, already viewed as high by more than a few market experts, as investors enter a pivotal period of recovery from the worst pandemic in over a century and a new presidential regime to enter under elected President Joe Biden, who takes the oath of office on January 20th.
Despite nagging fears that valuations, and especially values for high capitalization tech companies, are being rated for perfection by some companies like Tesla Inc.
Many see a paradigm of Wall Street bubble fears and see stocks only going one way over the next year: the sky.
Read: The stock market is abundant, but it may be at "far more reasonable valuation levels than traditional measures suggest".
Shying away from the notion that the bull market for stocks is exhausted, analysts are instead offering estimates of year-end 2021 earnings and, in some cases, forecasting staggering rallies for the market over the next 12 months.
JPMorgan Chase's Dubravko Lakos-Bujas delivers one of the more anti-gravity forecasts for the S&P 500 at 4,400, which would mean a staggering increase in the benchmark index of almost 19%.
To put this in perspective, the S & P 500
has already recorded an increase of almost 15% in 2020, the Dow Jones Industrial Average
A 6% increase is planned for the current year, while the technology-heavy Nasdaq Composite Index
is on track to up 43% in 2020. And don't even start with the staggering gains major stock benchmarks made from the lows of March 23rd of the year.
And it's not just cops like Dubravko Lakos-Bujas and the handful of other strategists that MarketWatch surveyed this year. The entire stock analyst community is struggling to imagine a world where the S&P 500 will end lower next year.
S&P 500 analyst targets for the end of 2021
Piper Sandler Company
Wells Fargo Investment Institute
3,800 (until spring / summer)
According to FactSet data, the mean price target at the end of the year for the S&P 500 index in 2021 is 4,027.21 as of Thursday noon, which corresponds to an increase of around 9% compared to the closing price of the broad market index in the week that is only shortened by public holidays.
It may be hard to fault the almost unbridled enthusiasm for what lies ahead in 2021 after a year of immeasurable tragedy from the COVID-19 pandemic.
In total, the US reported 18,495,851 cases and 326,871 deaths as of Thursday lunchtime, data from Johns Hopkins University shows. In addition, more than 22 million people lost their jobs and brought the economy to its knees during the worst epidemic in the United States.
Kristina Hooper, who maintains one of the more optimistic market outlook for 2021, said progress in rolling out COVID vaccines and remedies had encouraged the bulls, and the Federal Reserve, which has promised to keep interest rates close, has everyone past and future purchases stopped 0% until at least 2023 and continue to buy bonds and monetize the US federal debt.
"I expect much of the gains to come in the first half of 2021, disregarding strong economic expansion following widespread vaccine adoption," Hooper told MarketWatch on Thursday afternoon via email. "I also expect the Fed to remain extremely accommodative, which should support risk-weighted assets, especially stocks," she said.
CFRA's Sam Stovall, whose 2021 S&P 500 target is nearing the FactSet median, offers a fairly sober estimate of the 4,080 stock outlook.
Stovall told MarketWatch that "optimism abounds," referring to its research outlook report for 2021, saying the target is justified by the Fed's expected money-making policy and hopes for more government aid to keep the fragile economic recovery on the rails and in the US virus outbreak on the ropes.
"As we approach the beginning of 2021, there is great optimism," he wrote. "A new administration will be set up at the start of the New Year, possibly backed by a unified Congress that offers the prospect of additional fiscal incentives, along with the Federal Reserve, which is committed to doing whatever it takes," he said, referring to the now famous pledge made by former European Central Bank President Mario Draghi in 2012 to preserve the euro at the height of the eurozone debt crisis.
BTIG's Julian Emanuel and Michael Chu say the next year will be an epic "wealth redistribution" where small cap stocks could outperform large caps and value trounces on an annualized basis in years of wastage for undervalued stocks . Those momentum should appeal to the broader market, the couple predicts.
BTIG explains it this way:
Outlook from ExcerPT BTIG for 2021
Global synchronized growth, sustained by the ease of the central bank and a Washington that sees the decidedly mixed 2020 election results as a catalyst for cooperation (spending, it is necessary) and centrist government (no tax hikes), is leading to one Redistribution of wealth in line with the synchronization of 2003-06 reflation period in which value outperformed. Growth, small cap outperformed large cap, and international stocks outperformed the S&P 500.
It should be noted, however, that the stock analysts weren't even close to the mark in their 2020 forecasts, assuming the S&P 500 holds its current level by trading on holidays over the next week.
Piper Sandler's Craig Johnson came closest to forecasting the S&P 500's current 3,700 range last year, with an initial 2020 year-end target of 3,600, MarketWatch's Chris Matthews reported. Johnson estimates the S&P 500 will end at 4,225 in 2021, according to Piper modeling.
"We don't expect to get there in a straight line, however," he told MarketWatch on a LinkedIn message.
To be fair, a pandemic is difficult to predict, and few, if any, have had a clear understanding of how the market would respond to the public health crisis before the end of March. There are certainly some market participants who suggest that a test of the market lows is still near, like here in April and here in May.
According to MarketWatch columnist Mark Hulbert, the stock market forecasts are not “investment roadmaps”, but marketing documents for fund management companies.
The Bespoke Investment Group offers an even more open presentation of the stock market forecasts:
“We don't pretend to know where the S&P will be trading in twelve months. Wall Street's strategic goals are almost always wrong in their forecasts, ”writes BIG in its forecast report for 2021.
“The whole game of strategists setting year-end goals each year reminds us of Charlie Brown trying to play a soccer ball. He keeps trying to get it right, but each time Lucy has different plans. "
Looking to the future, there is little on the US economic calendar in the final week of 2020, which is also abbreviated as much of the world watches New Years on Friday.
TuesdayInvestors will be watching the S&P Case-Shiller Property Price Index at 9:00 a.m. Eastern Time in October. Wednesday A pre-sale report will be posted at 8:30 p.m., a reading of Chicago area manufacturing at 9:45 a.m., and a home sale at 10:00 a.m.
The last day of the week and the year Thursday concludes with a report on weekly unemployment claims at 8:30 a.m.