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The S&P 500 is on track for more record highs in 2021 as a COVID-19 vaccine triggers a reopening of the world economy, Wall Street analysts say.
The size of expected profits varies across Wall Street, with Bank of America seeing an increase of 1.8%, Morgan Stanley predicting a return of 4.5% and Goldman Sachs predicting an advance of 15%.
“We remain bullish on the US stock market and expect the average stock to outperform the index,” said Morgan Stanley stock strategist Michael Wilson. “This is typically during the recovery phase when earnings drive stocks rather than multiples.”
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A continued setback in economic growth will fuel the growth of the top line, while saving margins will help increase margins, saying that a “widening of market performance away from structural growth” will help boost the S&P 500 to its 2021 end goal of 3,900 to drive by 2021.
The five mega-cap technology stocks – Apple, Microsoft, Amazon, Google and Facebook – make up 22% of the S&P 500 and have yielded about 48% this year, compared to just a 4% return from the remaining 495 companies. to Goldman Sachs.
Strategists of the company believe that the stock market can still succeed in an environment where the stocks are underperforming next year. They say the benchmark S&P 500 could reach its 4,300 target if the five shares get only 5% next year if the remaining shares average 20%.
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A ‘barbell strategy’ consisting of both tactical positions in stocks with deep value and long-term holdings of secular growth stocks is the best way to play the market next year, the Goldman strategists said.
Not everyone on Wall Street expects the S&P 500 to see strong gains in the coming year.
“There is already a lot of praise for vaccine / recovery,” wrote Savita Subramanian, equity and quantum strategist at Bank of America. Her 2021 final goal for the S&P 500 is 3,800.
Subramanian takes note of the implementation of vaccines and longer closures are one of the risks stocks will face next year.