With global markets strengthening in the hope that a massive economic stimulus will accompany President-elect Joe Biden’s new administration, Goldman Sachs’s projection that the S&P 500 will end 2021 at 4,300 points looks even more realistic.
In our call of the day, David J. Kostin, chief investment strategist for the investment bank in the United States, traced the path to 4,300.
Goldman sees the S&P 500 SPX,
rising 14% over the year, after one of the most observed indices in the world closed at 3,756 to end 2020. A further 7% growth in the index is projected for 2022 – reaching 4,600.
Underlying a double-digit forecast for returns in 2021 is the investment bank’s optimistic projection of the US economy – 6.4% real growth in gross domestic product compared to the 4.2% consensus.
Adding to the economic momentum for stocks is a massive increase in earnings per share (EPS), a recovery from the terrible impact that the COVID-19 pandemic had on corporate financial results. Goldman expects EPS to rise 31% in 2021, after falling 17% in 2020.
Along with EPS are projections of a strong margin recovery, which Goldman expects to be greater than the bottom-up consensus forecast. An increase in margins is largely driven by operational leverage, as well as moderate labor costs.
High operational leverage stocks outperformed 2020, and Goldman expects this trend to continue throughout this year due to strong economic growth.
In many ways, the 18% rise in the S&P 500 in 2020 was helped by its five biggest stocks: tech giants Facebook FB,
Amazon AMZN,
Apple AAPL,
Microsoft MSFT,
and Alphabet GOOGL,
These shares returned 56% compared to the 11% growth of the remaining 495 companies.
However, Goldman warns that investors are compliant with antitrust risks.
While China’s antimonopoly actions destroyed the performance of Chinese technology stocks in just eight weeks, the market largely failed to react to the Justice Department’s lawsuit against Google and the Federal Trade Commission’s lawsuit against Facebook.
Closing the roadmap to 4,300 are the industry weights recommended by Goldman Sachs. The investment bank has information technology, health, industrial products and materials classified as overweight, while communication services, basic consumer goods, public services and real estate are underweight.
The buzz
The day after Donald Trump became the first president to face two charges of impeachment, Biden is expected to propose a $ 2 trillion increase in tax spending to help the U.S. economy overcome the COVID-19 pandemic, according to a CNN report.
Alibaba 9988,
and Tencent 700,
stocks soared in Hong Kong, and Baidu rose in the Nasdaq premarket after reports that American investors will not be banned from investing in Chinese Internet giants, after all.
It’s a big data day, with initial and ongoing claims for unemployment benefits falling due. Some 800,000 initial claims for unemployment benefits are expected to be reported – up from 787,000 last week. But Federal Reserve Chairman Jerome Powell’s 12:30 EST speech on the economy is likely to be the star of the economic show.
The National Road Traffic Safety Administration has asked electric car maker Tesla TSLA,
to voluntarily recall 158,000 Model S and Model X cars, after provisionally concluding that a possible defect in the vehicle screen could impact safety.
Read too: He started buying Tesla for just $ 7.50 and is now retiring at 39, with $ 12 million worth – he still refuses to sell a single share
Running out of encryption? According to Cointelegraph, the eToro exchange platform is struggling to keep up with “unprecedented demand”, warning cryptocurrency traders that limited liquidity means that there may be limitations on purchase orders.
More: Bitcoin and its ‘funny business’ should be regulated globally, says the head of the European Central Bank
SPCE of the space flight company Virgin Galactic,
the shares rose nearly 12% in the New York pre-market after ARK Investment Management applied to the Securities and Exchange Commission to launch a publicly traded fund for space exploration.
The markets
It looks like a positive day ahead. YM00 stock market futures,
ES00,
NQ00,
are pointing upwards, set to a strong opening with the Dow pointing upwards over 100 points. Asian NIK markets,
HSI,
SHCOMP,
rose across the board while the European SXXP indices,
UKX,
DAX,
PX1,
they are constantly in the green.
Market optimism comes as investors look at a possible $ 2 trillion Biden stimulus proposal. Sentiment is also driven by the rare easing of tensions between the US and China, as it appears that American investors will not be prevented from investing in some Chinese Internet giants.
The graph
US Treasury bonds are in focus on our BDSwiss Marshall Gittler day chart.
Yields of the 10-year Treasury note TMUBMUSD10Y,
it initially fell on Wednesday, pushed down by strong demand for 30-year bonds in a $ 24 billion auction. But the drop was reversed later in the day after the report on Biden’s stimulus plans.
Random readings
Wanted: Rangers in the UK, no previous experience expected.
The mayor of a Houston suburb was chosen by taking a name out of a hat.
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