Support vaccine developments: Morgan Stanley raises S&P 500 price target for 2021 | 12/3/20

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Immediately after the positive vaccine news from the pharmaceutical companies BioNTech and Pfizer or Moderna, the markets reacted with confidence. Analysts at the US bank Morgan Stanley see the news as a signal for an economic recovery – and expect a strong price increase for the S&P 500 index.

• Encouraging vaccine data from BioNTech and Moderna
• S&P 500 is set to rise to 3,900 points in 2021
• “Hidden treasures” benefit on the stock market

Vaccine drives markets

After the pharmaceutical companies BioNTech and Pfizer recently announced that they had achieved positive results with their vaccine against the coronavirus under development, investors in the stock market showed confidence. The two companies stated that, according to the current state of research, the vaccine had an effect of more than 90 percent and that the test subjects in the study had not yet experienced any serious side effects. Just one week after the positive data was announced, the pharmaceutical company Moderna also published positive study data on its own vaccine candidate. The US company announced that its serum offers an effectiveness of 94.5 percent. The markets reacted again positively.

Morgan Stanley see upside potential for the S&P 500

Analysts at the US investment bank Morgan Stanley expect long-term price increases as a result of the news, as “Markets Insider” reports. Accordingly, the S&P 500 should rise to 3,900 points by December 2021 – an increase of more than 7 percent compared to the current level of 3,638.35 units (closing price on November 30, 2020). Nevertheless, the analysts, under the leadership of chief strategist Michael Wilson, assume that the price of the index will repeatedly be unstable until then. In the short term, the S&P 500 will tend to move in a narrow range between 3,150 and 3,550 meters. However, investors should focus on the long-term forecast and have confidence in the economic recovery. In a bull scenario, according to Morgan Stanley, an increase to 4,175 jobs is possible, reports MarketWatch.

Selection of stocks is particularly crucial

According to the analysts, targeted investing will also determine which investors can benefit and which cannot. Investors who find “hidden treasures” on the stock market are particularly well positioned in the coming year, since interest rates will rise again as the economy recovers. “2021 will be much more about stock picking and should favor those companies that can deliver earnings growth that is not already anticipated or priced,” said Morgan Stanley strategists. Investors should be on the lookout for undervalued stocks in cyclical sectors that could benefit from an imminent economic recovery. The analysts also see great opportunities for companies whose success is closely tied to growth in gross domestic product. The market-friendly result of the US presidential election in early November, in which the Democratic challenger Joe Biden against the current incumbent Donald Trump won is an indicator of a recovery phase. “We think it is a good sign that the economic recovery is on the right track,” Markets Insider quoted the analysts as saying.

Goldman Sachs and JPMorgan also have higher forecasts

The strategists of the big bank are not alone with their optimistic outlook: Analysts from Goldman Sachs and JPMorgan also stated that they expect the S&P 500 to rise and raised their price targets. Market commentator Adam Kobeissi, founder of “The Kobeissi Letter”, expects a correction in the index. Although the news about the vaccine candidates was well received in the markets, investors should be aware that there is still a long way to go before the first vaccinations. “We are skeptical that this kind of optimism will persist as markets begin to adjust to the fact that when this vaccine gets FDA approval, it will be a lengthy process,” Kobeissi said, according to MarketWatch. Due to the still high number of infections, the S&P 500 would have recently slumped by at least five percent without the encouraging news. “As soon as sentiment turns away from a euphoric bull market, reality will strike and we expect the S&P 500 to feel the pressure,” he added. Accordingly, he has a goal of 3,510 points in view.

Finanzen.at editors

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