· Wall Street analysts make a big S&P 500 call for 2021. Market history says ignore them
Wall Street analysts could not have predicted that a new strain of the coronavirus detected in the U.K. and South Africa would lead to the S&P 500 taking a dive in market trading on Monday morning, even as the U.S. government reached a long-awaited second Covid-19 stimulus deal.
It’s tough to see the future, whether a day out or longer.
That’s important for investors to remember as Wall Street issues predictions for the stock market in 2021. Wall Street bets that a stimulus deal would keep stocks moving up looked more shaky on Monday. Though the heavy selling on Monday did ease — and it is impossible to know what really moves the market on any single day, for example, the Fed’s power, so important to this bull market, was also in play in the new legislation — the history of longer-term stock forecasts should not inspire investing confidence.
2021 market will start with more uncertainty
Analysts’ job in calling the S&P 500 a year out won’t be any easier for 2021 given the uncertainty related to Covid-19, and the pace of economic recovery in the U.S. and globally, even if vaccine campaigns and government stimulus are successful. Not to mention, many companies are still not providing guidance to Wall Street given all the uncertainty in the world. While the S&P 500 tracks the 500 largest-cap U.S. stocks, many of those stocks gain a significant percentage of revenue from overseas, around 30% of sales for the index as as a whole in recent years.
“The expectation is we will see a recovery in earnings at some point in time, in 2021 or 2022, but when does that take place ?” Butters asked.
He thinks watching how many companies provide guidance when they report fourth quarter 2020 results early next year may be a better tell than the year-end predictions being issued now.
There is room for earnings growth.
So as investors plan their portfolio strategies for 2021, the history of S&P 500 year-end calls suggests that investors might want to be careful what they wish for — they just might not get it.
· Japan shares mixed but signs point to more upside potential
Japanese shares ended mixed in holiday-thinned trade on Friday but some investors bought pro-cyclical stocks that are expected to perform well next year as the global economy recovers from the coronavirus pandemic.
The Nikkei 225 Index ended down 0.04% at 26,656.61. The broader Topix rose 0.23% to 1,778.41.
Shares in the shipping, raw materials, and real estate sectors rose, while tech firms fell as overall activity was substantially thinned by the closure of many financial markets for Christmas holidays.
· China stocks post weekly gains on Brexit deal, policy support
China stocks rose on Friday to post weekly gains, as the Brexit deal helped lift sentiment and as investors cheered Beijing’s continued policy support.
The blue-chip CSI300 index rose 0.8%, to 5,042.01, while the Shanghai Composite Index closed 1% higher at 3,396.56.
For the week, SSEC added 0.1%, while CSI300 index firmed 0.8%, hovering near a five-year high, as Beijing pledged further support for its economy.
Reference: CNBC
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