Coronavirus vaccine trumps divided government in turbocharging markets: Goldman Sachs

The firm sees the S&P 500 surging 16% next year

A COVID-19 vaccine would be more positive for the stock market and the economy than the prospective policies under President-elect Joe Biden, according to analysts at Goldman Sachs Group.

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Pfizer and German partner BioNTech announced on Monday that their COVID-19 vaccine candidate, which was developed in record time, was found to have a 90% positive efficacy rate and could start being distributed before the end of the year.

The vaccine’s news is a “positive event that will allow society to gradually normalize during 2021,” wrote a team led by David Kostin, chief U.S. equity strategist at Goldman Sachs, while boosting its yearend 2020 forecast to 3,700 from 3,600.

TickerSecurityLastChangeChange %
SP500S&P 5003666.72-2.29-0.06%

The strategists forecast the administration of at least one COVID-19 vaccine next year will cause the S&P 500 to surge 16% to 4,300. They see the benchmark index climbing another 7% to 4,600 by the end of 2022.

As the economy continues to normalize under a likely divided government under Biden, S&P 500 earnings will grow to $175 per share in 2021 and $195 the following year, up from previous expectations of $170 and $188, respectively.

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Biden has been declared the winner of the election by media outlets, including Fox News, but the results have not yet been certified. President Trump has filed lawsuits in several states, alleging election irregularities.

Goldman isn’t the only Wall Street firm that is bullish on stocks.

Strategists at JPMorgan earlier this week forecast the S&P 500 will reach 4,500 by the end of 2021 as a COVID-19 vaccine and the dissipation of trade war and election risk provide “one of the best backdrops for sustained gains in years.”

However, not everyone is on board with the idea that the S&P 500 is ready to rocket higher.

Morgan Stanley equity strategist Michael Wilson said in a note sent to clients on Sunday, before the vaccine was announced, that he prefers investors to take a wait-and-see approach as the market contends with near-term uncertainty from the unresolved election and the current wave of COVID-19 infections.

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His base-case scenario called for the S&P 500 to slide to 3,350 by June with a bull-case scenario resulting in a rally to 3,700.

“We remain committed bulls” over the next six-12 months, he said.