Guest host Jack Hough breaks down the three most important things investors need to think about with Barron’s brand editor Ben Levisohn, Barron’s reporter Carleton English and Barron’s senior writer Al Root.
The S&P 500 will climb another 7% this year as a COVID-19 vaccine will help the US economy exceed expectations, according to Goldman Sachs.
The company believes that S&P 500 earnings will be boosted by a sharp slump in sales and expanding profit margins as the economy recovers and investor confidence gains momentum.
“A falling premium risk for equities will outweigh an increase in bond yields and combined with our above consensus EPS forecast, the S&P 500 index will increase to 3,600 by the end of the year (+ 7%),” Goldman wrote team led by Chief US Equity Strategist David Kostin, who had a previous goal of 3,000.
| Ticker | Security | Last | Change | Change% |
|---|---|---|---|---|
| SP500 | S&P 500 | 3385.16 | +12.31 | + 0.36% |
The S&P 500 has been fighting for positive ground this year, up 4.4% after the COVID-19 pandemic caused a 34% toss in the 23 trading days after the record high of 19 February.
The comeback of the S&P 500 is supported by the Federal Reserve cutting interest rates to near zero and unusual incentives on both fiscal and monetary policy fronts designed to support the economy through the pandemic. The company estimates that the Fed’s balance sheet will swell by another $ 800 billion this year and another 1.3 trillion in 2021.
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Goldman economists expect at least one COVID-19 vaccine to be approved by the end of this year, putting the U.S. economy on track to grow 6.4% by 2021, better than the 3.9% growth expected by consensus. Kostin expects the S&P 500 to reach 3,800 over the next 12 months.
While the 2020 election remains a “significant risk” to Goldman’s forecast – a bid by Biden could result in higher corporate tax rates – the virus remains front and center.
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“The biggest risk to our prognosis is the timing of a vaccine and path of recovery from the pandemic,” Kostin wrote.
