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Bull Market to Surge on Vaccine Snapback

After Pfizer's big vaccine news last week, big bank strategists were scrambling to raise their outlooks for the 2021 economy. JPMorgan's chief U.S. equity strategist Dubravko Lakos-Bujas put out a note with this lede...

“The equity market is facing one of the best backdrops for sustained gains in years. After a prolonged period of elevated risks (global trade war, COVID-19 pandemic, US election uncertainty, etc.), the outlook is significantly clearing up, especially with news of a highly effective COVID-19 vaccine."

In the November 9 note, he detailed his growth drivers and projections for a 24% advance in the S&P 500 index to 4,500.

A few days later, Goldman Sachs chief U.S. equity strategist David Kostin not only boosted his year-end S&P 500 target to 3,700 from 3,600, but outlined why he expects the broad equity benchmark to rally over 20% to 4,300 in 2021.

He also cited the potential for a successful COVID-19 vaccine, following the lead of Goldman's chief global economist Jan Hatzius who published a report on November 7 -- before the Pfizer news -- titled "V(accine)-Shaped Recovery."

The Hatzius team view is that with the strong chances for a divided government to unfold as the elections are settled, the main economic story remains about the virus and the medical response to defeat it.

Kostin and Hatzius share a perspective about a resurgent US economy being able to produce over 5% GDP growth next year, vs the Wall Street consensus of just 3.8%. And this snap-back can ignite EPS growth for the S&P 500 of nearly 30% to $175 per share. A Federal Reserve committed to remaining ultra-easy certainly makes this an easier call for them.

Given the risk appetite this will create for investors competing for stocks, big new highs are clearly in sight. As you may know, my top two Secrets of Wall Street are #1 They Have to Buy and #2 They Don't Have to Sell.

In the video that accompanies this article, I go over some of these projections and what type of frothy valuations they could create for the market.

Here's one simple equation to give you an idea: SPX at 4,300 / EPS of $175 = 24X Forward P/E Multiple. That's frothy!

I also share why a lot of this enthusiasm is priced-in to shares right now, even with more recent vaccine success from Moderna MRNA, which we just took 39% gains on in my Healthcare Innovators portfolio.

I show charts where I expected stock indexes to pull back to in November and still think they could as sentiment runs hot and institutional investors are exhibiting nearly 3-year highs in bullishness, according to the Bank of America Fund Manager Survey.

The theme for me has been to take profits and raise cash lately, as I've done in NVIDIA NVDA, Alibaba BABA, and Micron MU.

But that doesn't mean I'm running away from the market as I've also found spots where I wanted to buy Shopify SHOP and Baidu BIDU.

Be sure to watch the video to see how I use sentiment data from Investors Intelligence and the NAAIM survey.

Everything I'm looking at says that even with good market breadth, it's time to take a breather.

Disclosure: I own shares of NVDA, BABA, SHOP, and BIDU for the Zacks TAZR Trader portfolio.

Zacks Names “Single Best Pick to Double”

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.

Free: See Our Top Stock and 4 Runners Up >>


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Micron Technology, Inc. (MU): Free Stock Analysis Report
 
NVIDIA Corporation (NVDA): Free Stock Analysis Report
 
Baidu, Inc. (BIDU): Free Stock Analysis Report
 
Moderna, Inc. (MRNA): Free Stock Analysis Report
 
Alibaba Group Holding Limited (BABA): Free Stock Analysis Report
 
Shopify Inc. (SHOP): Free Stock Analysis Report
 
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