Constellation Research founder Ray Wang provides information about the shares of Tesla, Zoom, Zscaler, Moderna, Peloton and Etsy, as well as IPOs of 2020 and 2021.
The S&P 500 is set for more records in 2021, as a COVID-19 vaccine drives the reopening of the global economy, Wall Street analysts say.
The size of the expected earnings varies on Wall Street, with Bank of America seeing a 1.8% increase, Morgan Stanley predicting a 4.5% return and Goldman Sachs predicting a 15% advance.
“We remain optimistic about the US stock market and we expect the average stock to outperform the index,” said Michael Wilson, stock strategist at Morgan Stanley. “This is typical during the recovery phase, when profits drive stocks, rather than multiples.”
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A continued resumption in economic growth will fuel strong frontline growth while cutting costs helps boost margins, he said, noting that an “expansion of market performance away from structural growth” will help propel the S&P 500 to its 2021 year-end target of 3,900.
The five mega-cap technology stocks – Apple, Microsoft, Amazon, Google and Facebook – account for 22% of the S&P 500 and have returned about 48% this year compared to just 4% return for the remaining 495 companies, according to Goldman Sachs.
The company’s strategists believe that the stock market may still be successful in an environment where the performance of these stocks will be lower in the next year. They say that the S&P 500 benchmark could reach its goal of 4,300 if those five stocks gain just 5% next year and the remaining shares on average 20%.
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A “bar strategy” made up of tactical positions in high-value stocks and long-term holdings in secular growth stocks is the best way to play the market next year, Goldman strategists said.
Not everyone on Wall Street expects the S&P 500 to see strong gains next year.
“There is already a lot of optimism in vaccination / recovery,” wrote Savita Subramanian, Bank of America stock and quantification strategist. Its 2021 year-end goal for the S&P 500 is 3,800.
Subramanian noted that vaccine delivery and longer blockages are among the risks that stocks will encounter next year.