...

"Very doable": How the S&P could reach 5,000 within the next two years




  • In Business
  • 2021-07-20 11:31:53Z
  • By Axios
 

Even with Monday's stock market swoon, the S&P 500 could still rally to 5,000 within the next two years.

Why it matters: A big round number like 5,000 may seem like a stretch. But it's really not if you consider the historical precedents and the fundamentals, which support the case for reaching that milestone from its 4,258 close on Monday.

Get market news worthy of your time with Axios Markets. Subscribe for free.

What they're saying: "If the economy continues to expand post-COVID, and companies continue to prosper in this new world, S&P 5,000 over the next two years seems very doable," Baird market strategist Michael Antonelli tells Axios.

By the numbers: To get to 5,000, the S&P 500 would have to gain a little over 8% per year for two years. This compares to a longer-term average return of about 10%.

  • "We are currently in year two of the bull market," LPL Financial's Ryan Detrick tells Axios. "So the key is this is actually still a young bull and higher than average returns are possible."

  • He notes that the S&P produced gains in each of the last five full months, a pattern which on average is followed by another 13% gain in the next 12 months. This gets you most of the way to 5,000.

Threat level: The Federal Reserve is expected to hike interest rates within the next two years, which could cool valuations, says DataTrek Research co-founder Nicholas Colas.

  • Strong earnings growth could fuel a broad rally that gets the S&P to 5,000 in two years, but it "feels like a stretch," he says.

The intrigue: Instead, Colas argues it's more probable that milestone will be achieved thanks to a handful of massive, high-growth tech names: Alphabet, Amazon, Apple, Facebook and Microsoft.

  • "If those 5 stocks each gain 30% over the next 2 years, that would be worth 6.6 percentage points of overall S&P gains," he wrote last week.

  • This path would require the other 495 stocks in the S&P to generate mid-single-digit gains per year for the index to get to 5,000 in two years, Colas says.

The bottom line: Forecasts for further stock market gains would be much more doubtful if they weren't backed by fundamentals. But the underlying economy continues to be one that's got a lot of pent-up demand coming from consumers with a lot of spending capacity.

COMMENTS

More Related News

Advice From Mark Cuban, Warren Buffett and Other Experts That Can Help You Survive a Crisis
Advice From Mark Cuban, Warren Buffett and Other Experts That Can Help You Survive a Crisis

Amid a calamitous year (and then some) marked with historic civil unrest, a full-blown pandemic and a whiplashed economy, we could all use some words of...

Conservationists push centrists to back Biden
Conservationists push centrists to back Biden's climate agenda with $4 million ad buy

The League of Conservation Voters and Climate Power are aiming another $4 million worth of ads at centrist House Democrats, urging them to support the...

Youngkin tightening the race in Virginia gubernatorial run
Youngkin tightening the race in Virginia gubernatorial run

Standing on a flatbed hitched to a John Deere tractor in red Rockingham County, Virginia, Glenn Youngkin decried California liberalism and bashed his rival, ...

Scoop: Centrists back $3.5T package
Scoop: Centrists back $3.5T package

Two of the nine House centrists who demanded Speaker Nancy Pelosi (D-Calif.) bring the $1.2 trillion bipartisan infrastructure bill to the floor by Monday...

Dow, S&P 500 end with gains up after bumpy week, but Nike drags
Dow, S&P 500 end with gains up after bumpy week, but Nike drags

NEW YORK (Reuters) - The S&P 500 ended slightly higher on Friday after a volatile week as gains in growth names like Facebook offset a dive by Nike after the...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business