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Stocktake: Strategists eye more market gains in 2021

After roller-coaster ride for stock markets in 2020, a robust earnings rebound is expected

‘2021 could be a very, very good year in markets,’ says hedge fund manager Bill Ackman. Photograph: Michael Nagle/Bloomberg

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Proinsias O'Mahony
Tue Jan 5 2021 - 05:40

2020 was a roller-coaster ride for stock markets, with the S&P 500 ultimately enjoying strong gains after rallying over 65 per cent from March’s bottom. So what’s in store for 2021?

More gains, say market strategists. The median forecast is for a gain of 9 per cent, according to FactSet, although the range in forecasts is wider than usual.

Like most strategists, Bank of America's Savita Subramanian envisages a robust earnings rebound. And like many other strategists, she reckons the recent rotation out of growth and into value stocks will continue into 2021. Nevertheless, Subramanian expects the S&P 500 will ultimately eke out minor gains in 2021 as a "lot of optimism" is already baked into stocks.

Nirvana

Others are more bullish. "2021 could be a very, very good year in markets. Go long," says hedge fund manager Bill Ackman, pointing to low rates, fiscal stimulus and easy access to capital. Goldman Sachs thinks the US market can advance another 16 per cent in 2021 while JPMorgan reckons "nirvana" is coming, with the S&P 500 poised to gain up to 25 per cent.

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Market risks – the pandemic, US election uncertainty, trade wars – have subsided, JP Morgan reasons. It argues hedge fund positioning, further retail buying and a continued rotation from non-equity into equity could drive up to $1 trillion into US stocks next year.

In other words, expensive stocks may get more expensive amid a market “melt-up” in “one of the best environments for equities in a number of years”.

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