Why Goldman Sachs now sees a major surge in the stock market
The number crunchers at Goldman Sachs are bullish on how a COVID-19 vaccine could impact the stock market.
Very bullish, to put it mildly.
Goldman’s chief strategist David Kostin hiked his year-end S&P 500 price target by 4% to 3,700 on Wednesday. The lift comes after a surge in the market this week following upbeat news Monday from Pfizer in the race to develop a COVID-19 vaccine. That surge has taken the S&P 500 to 3,570 — so Kostin is looking for a good deal more upside as other players such as Moderna (MRNA) release trial data soon.
“A vaccine is a more important development for the economy and markets than the prospective policies of a Biden presidency. 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,” Kostin writes.
Kostin sees the equity rally at the hands of vaccine distribution continuing into 2021. The strategist projects the S&P 500 rising 16% to 4,300 by the end of 2021 and recommends investors buy deep value stocks. He thinks the S&P 500 will reach 4,600 by the conclusion of 2022.
Underpinning Kostin’s bullish calls is a sharp profit improvement in S&P 500 companies as a vaccine brings the economy back to some form of new normal (which is better than the currently depressed normal). Kostin models for S&P 500 earnings in 2021 to hit $175 — up from a prior estimate of $170 — and climb to $195 in 2022 ($188 previously).
Kostin isn’t alone on Wall Street to come out bullish on stocks in the wake of the presidential election. Strategists at JPMorgan also caught some attention this week for a big call of their own. Similar to Goldman, JPMorgan is very optimistic on the economic impact from a COVID-19 vaccine.
JPMorgan sees the S&P 500 finishing the year above 3,600 and then closing at 4,500 or so by the end of 2021.
“The equity market is facing one of the best backdrops for sustained gains in years. After a prolonged period of elevated risks (global trade war, COVID-19 pandemic, U.S. election uncertainty, etc.), the outlook is significantly clearing up, especially with news of a highly effective COVID-19 vaccine,” JPMorgan strategists wrote.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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