S&P 500 Index to target 3700 by June 2021 – UBS
Equity markets fell on Friday as the mega-cap tech companies offered a mixed view on the earnings outlook and investors focused on a continuing rise in COVID-19 hospitalizations and mobility restrictions. The S&P 500 fell 1.2% for a total decline of 5.6% on the week. Given the event risk around the US election, near-term uncertainty is high but economists at UBS think the setback to risk assets is likely to be relatively short-lived and investors should stick to their financial plan.
Key quotes
“Regardless of who wins the presidency, we expect another sizable fiscal stimulus bill to pass soon after the election. Both monetary and fiscal policy should remain accommodative. And with ten vaccine candidates in late-stage trials globally, our central scenario is that restrictions can start to be lifted by 2Q21, helping corporate earnings recover to pre-pandemic levels by around the end of 2021.”
“While mega-cap tech disappointed last week, third-quarter US earnings overall have been solid. At present, 85% of companies are beating expectations by an average of 15%, much better than the typical earnings beat of 3%-5%. In addition, fourth-quarter estimates for the majority of companies are rising, suggesting good earnings momentum.”
“We continue to see upside over the medium-term, and target 3,700 on the S&P 500 by June 2021, around 13.2% higher than the current level.”
Author
FXStreet Team
FXStreet
