NEW YORK (Reuters) – The S&P 500 is set to rise 9% between now and the end of 2021 as the early widespread release of a COVID-19 vaccine drives economic recovery and corporate profits from the pandemic, according to a Reuters survey of strategists.
After a recovery of over 60% from March lows of the outbreak to a record high on November 16, the benchmark index has now risen around 10% year to date.
The S&P 500 benchmark will end 2021 at 3,900, with a gain of 9% from its close on Monday of 3,577.59, according to the median forecast of 40 strategists surveyed by Reuters in the past two weeks.
The index is expected to end 2020 at 3,600, close to its current level, according to the survey median.
Recent evidence of high efficacy rates in experimental COVID-19 vaccines spearheaded a progress in actions this month, and survey strategists cited vaccine advances as the main factor behind their predictions.
“They assume a vaccine will be widely available starting some time in the second half of 2021,” said Sameer Samana, senior global market strategist for Wells Fargo Investment Institute, who has a 2021 year-end forecast for the S&A. P 500 of 3,900.
With a major economic recovery expected to follow, Wall Street is likely to “grossly underestimate” next year’s earnings rebound, said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis, who sees the S&P 500 ending. next year to 4,100.
“This is something that I think could be a huge driving force,” for equities, he said.
Wall Street analysts predict S&P 500 earnings will rise 23% in 2021 after falling more than 15% in 2020, according to I / B / E / S data from Refinitiv.
When asked when earnings will return to pre-COVID-19 levels, most respondents said it would happen within a year.
Chart: When Will Corporate Earnings Return to Pre-COVID-19 Levels in the US Stock Market ?,
Recent hopes related to the vaccine has given new life to cyclical stocks, such as industrials and energy stocks, that investors dumped earlier during the pandemic.
Based on the survey, the Dow Jones industry average, which was close to 30,000 as of Monday, will end next year at 32,500, an increase of around 10%. from Closed on Mondays.
Some strategists predict that the gains in cyclical cycles will extend into 2021, but others say the rotation may not be long-lasting.
Jonathan Golub, chief US equity strategist at Credit Suisse Securities, is neutral on cyclicals to 2021. In his forecast for next year, he wrote that “the key case for TECH + remains compelling” based on expected growth in sales and margins, among other factors. He expects the S&P 500 to finish next year at 4,050.
The S&P 500 technology sector, which includes Apple Inc. and Microsoft Corp., have been up about 30% for the year so far and lead the gains across sectors, followed by the consumer discretionary sector, which includes Amazon.
Investors have been upbeat after Democrat Joe Biden’s victory in the US presidential election without a “blue wave” from Democrats earlier this month, a feeling that is likely to remain if a divided Congress means limited regulatory changes and choices. Biden’s government are favorable to the market.
On Monday, investors hailed reports that Biden had chosen former Federal Reserve Chairman Janet Yellen as the next Treasury Secretary.
Poll strategists said Fed expectations will remain an accommodating help to support the equity cause next year.
“The Fed has said it intends to keep short-term rates at zero until at least 2023. With ultra-low rates, stocks have little competition,” said Hank Smith, chief investment officer at Haverford Trust Co. in Radnor, Pennsylvania.
Reporting by Caroline Valetkevitch; additional reports by Chuck Mikolajczak, Noel Randewich, Sinead Carew, Stephen Culp and Alden Bentley; further polls by Richa Rebello and Manjul Paul; edited by Ross Finley and Bernadette Baum