Wall Street gets more bullish on equities

Indices

Wall Street banks are getting increasingly bullish on the outlook for equity markets as election risks subside and the Pfizer vaccine creates a much rosier outlook for 2021.

Goldman Sachs raised its 2020 target for the S&P 500 to 3,700 from 3,600 previously. This implies a forward PE multiple of 21x, rising to 22x by the end of 2021.

Strategists at the bank say that a vaccine is a more important development for the economy and markets than the prospective policies of a Biden presidency. And the outlook for 2021 is extremely bullish, with the year-end price target of 4,300, implying 16% upside.

It comes after fellow Wall Street investment bank raised its year-end price target for the S&P 500 to 3,600 and said the election outcome created a ‘market nirvana’. JPM also raised its 2021 forecast for the index to 4,000.

For Europe, GS expects a “V(alue)-shaped recovery” in 2021. They see growth making a marked acceleration and expect a strong bounce in STOXX Europe earnings with policy support to remain in place.

On FTSE 100, Goldman sees the improved macro and commodities environment as supportive going forward. The bank forecasts the FTSE 100 to reach 7,200 by the end of 2021, implying 20% total return in GBP.

Since Pfizer announced its vaccine is 90% effective in phase three clinical trials markets have reacted positively though there has been a notable rotation out of growth stocks and into value and cyclical areas. This has best been demonstrated by the rally in the small cap Russell 2000 and decline in the Nasdaq 100. Whether this trend continues remains to be seen but it’s clear markets are on the move again.