S&P 500 to 5,000? Credit Suisse sets 2022 target for its stock market benchmark
There is still plenty of life left for corporate earnings, which should allow the S&P 500 to rise nearly 9% by the end of next year, Credit Suisse analysts said on Monday, in a note initiating a report. target of 5,000 for the end of the year. 2022.
Credit Suisse stayed true to its target of 4,600 for the end of 2021, a gain of 3.7% from the index close on Friday. But stocks could struggle in the near term, they said, as investors navigate issues such as a resurgence of COVID-19 infections and the eventual end of the Federal Reserve’s asset purchase program. .
âOver the past five quarters, analysts have significantly underestimated EPS (earnings per share), a trend that we expect to continue,â wrote analysts led by Jonathan Golub, chief US equities strategist and head of quantitative research.
Creidt Suisse raised its 2021 and 2022 EPS estimates, which were only partially offset by a drop in their forecast for the S&P 500 price-to-earnings ratio (see table below).
“While the economic data disappointed, input costs increased and stocks were de-stocked, EPS exceeded estimates by 16% in 2Q thanks to revenues (+ 5%) and margins (+11 %) more solid, âthey wrote. âWe see an advantage in the estimates as empty shelves are restocked and pricing power is maintained. Consumer spending is expected to improve as the unemployment rate continues to decline, accompanied by rising wages. “
Should know: If the S&P 500 breaks this key level, it could trigger “epic emotional pressure” much like 1999, strategists warn
The S&P 500 SPX,
closed Friday at 4,436.52, its 44th closing record of 2021. The Dow Jones Industrial Average DJIA,
finished last week at 35,208.51, also a record, while the Nasdaq Composite COMP,
finished at 14,835.76, just 0.4% off his all-time best result.
Shares were mostly down on Monday as investors sought direction and weighed the implications for the global economy from the continued spread of the delta variant of the coronavirus that causes COVID-19.
Read: Goldman lowers China’s growth, citing delta variant gap
Goldman Sachs strategists last week raised their S&P 500 targets for this year and next, citing better-than-expected earnings and lower-than-expected interest rates. Goldman raised its 2020 target to 4,700 from 4,300 and shifted its 2022 target from 4,600 to 4,900.
Analysts lowered their forecast for the price-to-earnings ratio for 2021 to 20 times earnings from 21.4, reflecting what they said were understandable concerns over the recent spike in COVID-19 cases, “the uncertainty regarding government stimulus and tax rates, the expectation that the Fed will withdraw quantitative easing and the elimination of additional unemployment benefits and forbearance “- which” are likely to weigh on markets to short term. “
Depressed Treasury yields, with the 10-year rate TMUBMUSD10Y,
dipping below 1.15% last week before rebounding to 1.30%, “casting a shadow over investor confidence,” they said.
Analysts acknowledged that a outlook based on higher earnings and a lower price-to-earnings ratio “might seem contradictory”, but noted that “each of these trends has been in place since last year.”
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