Goldman Sachs predicts the S&P 500 will surge more than 20 percent by the end of next year amid a divided U.S. government and the promise that vaccine will finally have the coronavirus pandemic under control.
The Wall Street firm on Wednesday hiked its year-end S&P 500 target to 3,700 from 3,600, a 4% rise from Tuesday’s close of 3,545.53, CNBC explained.
“By the end of 2021, Goldman expects the broad equity benchmark to rally to 4,300 — a 21% gain from the current level. The bank sees the S&P 500 reaching 4,600 by the end of 2022,” CNBC cited Goldman as saying.
“A vaccine is a more important development for the economy and markets than the prospective policies of a Biden presidency,” David Kostin, the bank’s chief U.S. equity strategy, said in a note Wednesday. “The much-awaited results from Pfizer (PFE) that its COVID-19 vaccine has an efficacy rate greater than 90% is a positive event that will allow society to gradually normalize during 2021.”
The bank also sees extreme policy changes as less likely under a split Congress.
“A divided government means little scope for major legislative changes, although trade and regulatory policy stances will likely differ relative to the Trump administration,” Kostin said.
Goldman isn't alone in making robust predictions about the stock market's future.
JPMorgan earlier this week said it expected the S&P 500 index to hit 4,000 points by early 2021 and called Pfizer Inc.'s COVID-19 vaccine update "one of the best backdrops for sustained gains in years."
"After a prolonged period of elevated risks (global trade war, COVID-19 pandemic, US election uncertainty, etc.), the outlook is significantly clearing up, especially with news of a highly effective COVID-19 vaccine," the U.S. investment bank said in a note to clients.
The bank said it expected the U.S. equity index to hit about 4,500 by the end of 2021, up 27% from Monday's levels, Reuters reported.
In a separate note, Citi said Pfizer's experimental COVID-19 vaccine being 90% effective exceeded the most optimistic market expectations and that transport and leisure stocks have the most to gain from any vaccine.
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