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As global markets rally in hopes that a massive economic stimulus will accompany President-elect Joe Biden’s new administration, Goldman Sachs’ projection that the S&P 500 will end 2021 at 4,300 points looks even more realistic.
In our call of the day, the investment bank’s chief U.S. equities strategist David J. Kostin led the way at 4,300.
Goldman sees the S&P 500 SPX,
up 14% throughout the year, after one of the world’s most watched indices closed at 3,756 to end 2020. A further 7% growth of the index is expected for 2022 – reaching 4,600.
Underpinning a double-digit forecast for returns in 2021 is the investment bank’s bullish projection on the U.S. economy – 6.4% real gross domestic product growth from the consensus of 4.2 %.
A massive increase in earnings per share (EPS), a rebound from the disastrous impact of the COVID-19 pandemic on business results, is adding to the economic stimulus for stocks. Goldman expects BPA to rise 31% in 2021 after falling 17% in 2020.
In tandem with BPA, there are projections of a strong rebound in margins, which Goldman expects to be higher than the ascending consensus forecast. An increase in margins is largely due to operating leverage, as well as to the moderation of costs such as labor.
Highly leveraged stocks outperformed in 2020, and Goldman expects that trend to continue this year thanks to strong economic growth.
In many ways, the 18% rally on the S&P 500 in 2020 was helped by its five biggest stocks: tech giants Facebook FB,
Amazon AMZN,
Apple AAPL,
Microsoft MSFT,
and GOOGL Alphabet,
These stocks returned 56%, compared to 11% growth for the remaining 495 companies.
However, Goldman warns investors are happy with antitrust risks.
While China’s anti-monopoly actions wiped out the performance of Chinese tech stocks in just eight weeks, the market largely failed to respond to the Justice Department’s lawsuit against Google and the Federal Trade Commission lawsuit against Facebook. .
Sector weights recommended by Goldman Sachs close the roadmap at 4,300. Investment banking has information technology, healthcare, industrials and materials classified 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 is expected to propose a $ 2 trillion increase in tax spending to help the U.S. economy weather the COVID-19 pandemic, CNN report says .
Alibaba 9988,
and Tencent 700,
Shares surged in Hong Kong and Baidu rose on the Nasdaq pre-market, after signaling that U.S. investors would not be banned from investing in Chinese internet giants, after all.
It’s a big day for data, with initial and ongoing unemployment claims due. Around 800,000 initial jobless claims are expected to be reported – up from 787,000 last week. But Federal Reserve Chairman Jerome Powell’s 12:30 p.m. EST speech on economics is likely to be the star of the economics show.
The National Highway Traffic Safety Administration asked electric car maker Tesla TSLA,
to voluntarily recall 158,000 Model S and Model X cars, after having provisionally concluded that a possible defect in the vehicle display screen could have an impact on safety.
Also read: He started buying Tesla for just $ 7.50, and now he retires at 39 with a value of $ 12 million – he still refuses to sell a single share
Running out of crypto? EToro exchange platform struggles to meet ‘unprecedented demand’, Cointelegraph says, warning cryptocurrency traders that limited liquidity means there may be limits on buy orders .
More: Bitcoin and its ‘fun business’ should be regulated globally, says European Central Bank chief
SPCE from space flight company Virgin Galactic,
The stock is up nearly 12% in the New York pre-market, after ARK Investment Management filed with the Securities and Exchange Commission to launch an exchange-traded fund for space exploration.
The steps
It looks like a positive day ahead. YM00 stock futures,
ES00,
NQ00,
point higher, ready for a strong open with the Dow pointing up over 100 points. Asian markets NIK,
HSI,
SHCOMP,
rallied at all levels while the European SXXP indices,
UKX,
DAX,
PX1,
are regularly in the green.
The market optimism comes as investors consider a possible $ 2 trillion stimulus proposal from Biden. Sentiment is also supported by the rare de-escalation of tensions between the United States and China, as it appears that American investors will not be prevented from investing in some Chinese internet giants.
Table
US Treasuries are the focus of our Marshall Gittler’s chart of the day at BDSwiss.
Yields on the 10-year Treasury bill TMUBMUSD10Y,
initially declined on Wednesday, driven by strong demand for 30-year bonds at a $ 24 billion auction. But the fall was reversed late in the day after Biden’s stimulus package report.
Random readings
Wanted: British Bison Rangers, no previous experience expected.
The mayor of a Houston suburb was chosen by pulling a name out of a hat.
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