With global markets recovering in the hope that President-elect Joe Biden’s new administration will be accompanied by a massive economic boost, Goldman Sachs’ prediction that the S&P 500 will end at 4,300 points by 2021 seems even more realistic.
In our call of the dayDavid J. Kostin, the investment bank’s chief US equity strategist, has charted the path to 4,300.
Goldman sees the S&P 500 SPX,
an increase of 14% through the year after one of the world’s best viewed indexes closed at 3,756 to close out 2020. A further 7% growth of the index is expected for 2022 – to 4,600.
Behind a double-digit forecast for returns in 2021 is the investment bank’s optimistic projection of the US economy: 6.4% growth in real gross domestic product, compared to the consensus of 4.2%.
In addition to the economic boost for equities, there has been a massive rise in earnings per share (EPS), a recovery from the dire impact the COVID-19 pandemic has had on corporate results. Goldman expects earnings per share to rise 31% in 2021, after a 17% decline in 2020.
Along with earnings per share, there are projections of a strong margin recovery, which Goldman expects to be higher than the bottom-up consensus forecast. Margins growth is largely driven by operating leverage and moderating costs such as labor.
Stocks with high operating leverage outperformed Goldman in 2020 and Goldman expects this trend to continue this year thanks to strong economic growth.
In many ways, the 18% rally on the S&P 500 in 2020 was aided by the five largest stocks: the technology giants Facebook FB,
Amazon AMZN,
Apple AAPL,
Microsoft MSFT,
and Alphabet GOOGL,
These shares returned 56%, compared to an 11% growth of the remaining 495 companies.
Goldman warns, however, that investors are complacent about anti-trust risk.
While China’s anti-monopoly actions wiped out the performance of Chinese technology stocks in just eight weeks, the market has largely failed to respond to the Justice Department’s lawsuit against Google and the Federal Trade Commission lawsuit against Facebook.
Closing the roadmap to 4,300 is Goldman Sachs’ recommended sector weighting. The investment bank has classified information technology, healthcare, industry and services and materials as overweight, while communications services, consumer staples, utilities and real estate are underweight.
The buzz
A day after Donald Trump became the first president to be impeached twice, Biden will propose a $ 2 trillion increase in fiscal spending to help the U.S. economy get through the COVID-19 pandemic, according to a report from CNN.
Alibaba 9988,
and Tencent 700,
stocks soared in Hong Kong and Baidu soared in the Nasdaq premarket, after reports that after all, American investors will not be banned from investing in the Chinese internet giants.
It’s a big day for data, with initial and ongoing jobless claims. About 800,000 initial claims for unemployment are expected to be reported – an increase from last week’s 787,000. But the Federal Reserve Chairman Jerome Powell’s speech at 12:30 p.m. EST on the economy is likely to be the star of the economic show.
The National Highway Traffic Safety Administration has asked Tesla TSLA, electric vehicle manufacturer:
to voluntarily recall 158,000 Model S and Model X cars, after tentatively concluding that a possible defect in the car’s display could affect safety.
Also read: He started buying Tesla for just $ 7.50, and now he’s retiring at the age of 39 with a value of $ 12 million – he still refuses to sell a single share
No more crypto? According to Cointelegraph, the exchange platform eToro is struggling to keep up with “unprecedented demand,” with cryptocurrency traders warning of limited liquidity, meaning there may be restrictions on buy orders.
Plus: Bitcoin and its ‘funny business’ must be regulated worldwide, says the head of the European Central Bank
Aerospace company Virgin Galactic’s SPCE,
Shares are up nearly 12% in the New York premarket after ARK Investment Management filed with the Securities and Exchange Commission to launch an exchange-traded space exploration fund.
The markets
It looks like a positive day. Stock market futures YM00,
ES00,
NQ00,
Point higher, ready for a strong open with the Dow up over 100 points. Asian markets NIK,
HSI,
SHCOMP,
gathered across the board as the European indexes SXXP,
UKX,
DAX,
PX1,
are steadily in the green.
Market optimism comes as investors look to a possible $ 2 trillion stimulus proposal from Biden. Sentiment is also supported by the rare de-escalation of tensions between the US and China as it appears that US investors will not be blocked from investing in some Chinese internet giants.
The graph
US Treasuries are central to our chart of Marshall Gittler’s day at BDSwiss.
Return on 10-year Treasury bill TMUBMUSD10Y,
initially moved lower on Wednesday, pushed by strong demand for 30-year bonds in a $ 24 billion auction. But the fall was reversed late in the day after the report on Biden’s stimulus plans.
Random reads
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