Strategists: Stock market rise from COVID-19 lows has further to go

According to a Reuters poll of strategists, the stock market is poised to rise between now and the end of 2021 as the anticipated widespread release of COVID-19 vaccines drive an economic and corporate earnings recovery from the pandemic.

stocksCaroline Valetkevitch for Reuters:

The benchmark S&P 500 will finish 2021 at 3,900, a 9% gain from its close Monday of 3,577.59, according to the median forecast of 40 strategists polled by Reuters over the last two weeks.

Recent evidence of high efficacy rates in experimental COVID-19 vaccines has driven an advance in equities this month, and strategists in the poll cited progress in the vaccine as the main factor behind their forecasts. “They assume a vaccine is widely available starting some time in the second half of 2021,” said Sameer Samana, senior global market strategist for Wells Fargo Investment Institute, which has a 2021 year-end forecast for the S&P 500 of 3,900.

With a big pickup in the economy expected to follow, Wall Street is likely “grossly underestimating” next year’s rebound in earnings, said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis, who sees the S&P 500 ending next year at 4,100. “That’s one thing I think could be a huge driving force,” for stocks, he said.

Based on the poll, the Dow Jones industrial average, which was near 30,000 through Monday, will finish next year at 32,500, up around 10% from Monday’s close… The S&P 500 technology sector, which includes Apple Inc. and Microsoft Corp., is up roughly 30% for the year so far and leading gains among sectors, followed by the consumer discretionary sector, which includes Amazon.

MacDailyNews Take: Again, we’re very hopeful that the various COVID vaccines will arrive on a widespread basis even more quickly than many thought possible earlier this year as the U.S.’s Operation Warp Speed accelerates the development and, importantly, the manufacture of millions of doses by funding steps to proceed simultaneously versus the usual, significantly slower sequential process.

11 Comments

          1. Look at historical data going back decades. The market goes up and down in the short term and goes up consistently in the long term. Unless you’re dumb enough to engage short term and/or dumb enough to buy one or just a few stocks and not diversify properly. If we’re ever in a situation where the market isn’t consistently gaining in the long term, money will be the least of your worries. The worst market downturns in history were all temporary. If people had just held they would have continued to make money long term as I have. If you want to call what I do betting then you are exposing your ignorance for all the world to see.

            1. What’s proper diversification? Does Buffett “diversify properly”? A month ago, Buffett had 78% of his money invested in just 5 companies. Is that proper diversification? Apple, BofA, Coke, Amex, and Kraft. Diversified? The greatest investor of all time?

  1. This hasn’t been a V-shaped stock market recovery, but a check mark, because it was a short sharp fall, followed by a long upward climb. Shocking really.

    S&P 12.1% ytd
    Dow 4.7% ytd
    Nasdaq 34% ytd
    Apple 58% ytd

  2. Yes this makes a lot of sense. We’re higher than before COVID. The stock market is up, unemployment is up, evictions and foreclosures are expected to shoot up. For many their savings are down. Where is the BIG pickup in the economy going to come from? At some point the excessive cash coming from the government is going to stop.

    Almost seems like we’re going through the 1918 pandemic and about to enter the roaring twenties. What came after that?

    1. Interesting analogy. The roaring twenties included prohibition, economic isolation and also republicans in power. The BLOTUS certainly was pursuing an isolationist policy in many ways.
      The biggest risk is over exuberance. We saw that with the dot.com bubble in 2000 and the credit crunch in 2008. That certainly was the case in the run up to the Wall Street crash in 1929.
      For me the high P:E ratios for many companies are concerning.
      AAPL ratio is historically high but at least they are performing very well. Other companies like Tesla are hyperinflated.
      They are unsustainable in the long term and when investors get tired of waiting for inflated success they could sell in droves.

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