Stock market professionals face difficulties in imagining a decline in the S&P 500 in 2021

No stock market analyst that MarketWatch questioned for this report predicts a retreat from current levels, already seen as high by several market experts, as investors move into a crucial phase of recovery after the the worst pandemic in more than a century and a new presidential regime under President-elect Joe Biden, who is taking the oath of office on January 20th.

Despite unshakable fears that ratings and, in particular, values ​​for high-capitalization technology companies, are at perfect prices, with some companies such as Tesla Inc. TSLA,
+ 2.44%,
representing a paradigm of Wall Street anxieties about market bubbles, many see that stocks are only going in one direction next year: to the sky.

Read: The stock market is rich, but may be at a “much more reasonable valuation level than traditional measures suggest”

Analysts believe that the stock market is running out and instead offers estimates for earnings at the end of 2021 and in some cases project attractive market rallies over the next 12 months.

JPMorgan Chase’s Dubravko Lakos-Bujas probably offers one of the most difficult gravity forecasts for the S&P 500 at 4,400, which would be a staggering increase of almost 19% for the benchmark.

To put this in perspective, the S&P 500 SPX,
+ 0.35%
has already gained almost 15% in 2020, Dow Jones Industrial Average DJIA,
+ 0.23%
is heading for a 6% increase this year, while the Nasdaq Comp Composite Index
+ 0.26%
is on its way to a 43% gain in 2020. And you’re not even starting to get the staggering gains made by the major stock market benchmarks from the March 23 lows of the year.

And not just bulls like Dubravko Lakos-Bujas and a few other strategists have been questioned this year by MarketWatch, the stock analysts community as a whole has concerns about a world where the S&P 500 will end next year.

S&P 500 Objectives analyst at the end of 2021

Analyst	Affiliation	Target 2021
Dubravko Lakos-Bujas	JPMorgan Chase	4,400
Kristina Hooper	Invesco	4350
David Kostin	Goldman Sachs	4,300
John Stoltzfus	Oppenheimer	4,300
Brian Belski	BMO	4,200
Keith Parker	UBS	4,100
Maneesh Deshpande	Barclays	4,000
Julian Emanuel	BTIG	4,000
Sam Stovall	CFRA	4080
Binky Chadha	German bank	3950
Mike Wilson	Morgan Stanley	3,900
Darrel Cronk	Wells Fargo Investment Institute	3,900
Tobias Levkovich	City Group	3,800
Savita Subramanian	BofA	3,800
Barry Bannister	Stifel	3,800 (until spring / summer)

The median end-of-year price target for the S&P 500 index in 2021 is 4,027.21, according to FactSet data, starting Thursday at noon, an increase of about 9% over the closing level of the broad market index in the short week of the holidays last.

It is perhaps hard to blame the almost unbridled enthusiasm for what is expected in 2021, after a year affected by an immeasurable tragedy in the COVID-19 pandemic.

Overall, the U.S. reported a total of 18,495,851 cases and 326,871 deaths since Thursday at noon, according to data from Johns Hopkins University. In addition, more than 22 million people lost their jobs during the worst epidemic in the United States, putting the economy on its knees.

Kristina Hooper, who maintains one of the bloodiest market prospects of 2021, said the progress in launching COVID vaccines and remedies has encouraged bulls, and the reserve for all past and future purchases is the Federal Reserve, which has promised to keep interest rates stable. close to 0% by at least 2023 and continue to buy bonds and monetize US federal debt.

“I expect a lot of gains in the first half of 2021, reducing strong economic expansion once vaccines are widely distributed,” Hooper told MarketWatch on Thursday afternoon via email. “I also expect the Fed to remain extremely accommodative, which should support risky assets, especially equities,” she said.

CFRA’s Sam Stovall, whose S&P 500 target for 2021, approaching the FactSet mid-range, offers a relatively sober valuation of its equity outlook at 4,080.

Stovall told MarketWatch that “optimism abounds,” referring to his 2021 research outlook report, and says the target is justified by expected Fed simple money policies and the hope of additional government fiscal aid to maintain the fragile economic recovery. on rails and viral outbreak on ropes.

“As we approach the dawn of 2021, optimism abounds,” he wrote. “A new administration will be installed at the beginning of the new year, with the possibility of a unified Congress to support it, offering the prospect of an additional fiscal stimulus, along with the Federal Reserve which is committed to doing ‘whatever is needed,'” he said. , referring to the famous commitment of the former President of the European Central Bank, Mario Draghi, in 2012, to keep the euro at the height of the euro area debt crisis.

Julian Emanuel and Michael Chu of BTIG say next year will be an epic “wealth redistribution,” in which small-cap stocks could exceed larger capital and value will grow annually based on growth, throwing long stocks for undervalued shares. This dynamic will probably bring the wider market, the pair’s forecast.

BTIG explains this:

However, it is worth noting that stock analysts were not even close to the mark in their 2020 projections, assuming that the S&P 500 maintains its current levels through next week’s abbreviated transaction.

Craig Johnson of Piper Jaffray came closest to the current 3,700 range of the S&P 500, with an initial year-end target at 3,600, MarketWatch’s Chris Matthews reported.

To be fair, a pandemic is hard to predict and few, if any, could have properly assessed how the market would react to the public health crisis before the end of March. There are certainly some market participants hiding, suggesting that a test of market lows is still close, as they did here in April and here in May.

However, according to MarketWatch columnist Mark Hulbert, the stock market forecasts “are not roadmaps for investment”, adding that they are mainly marketing documents for fund management companies.

Bespoke Investment Group offers its own approach to the stock market forecast with greater sincerity:

“We do not pretend to know where the S&P will trade in twelve months. Wall Street strategists’ targets are almost always wrong in their predictions, ”BIG wrote in its 2021 outlook report.

“The whole game of strategies that offer targets at the end of the year every year reminds us of Charlie Brown trying to kick a football. Countless times, he tries to do well, but every time, Lucy has other plans. ”

Next week

Looking ahead, there are few things in the US economic calendar in the last week of 2020, which will also be abbreviated as much of the world observes the New Year on Friday.

Tuesday, investors will track the S&P Case-Shiller home price index for October at 9:00 Eastern Time, Wednesday will see a report on the anticipated trade in goods at 20:30, a reading of production activity in the Chicago area at 9:45 and sales of homes pending at 10

Last day of the week and next year Thursday concludes with a report on weekly unemployment claims at 8:30 am