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S&P 500 is heading for 4,200

The S&P 500 index rose 5-10% in Q1 and looks set to extend gains by at least 12.4% this year, according to LPL Research. Strategists base their analysis on historical parallels. This makes sense, since the US stock market has an extensive history that in many ways makes it a bellwether. LPL’s findings are underpinned by a huge span of time by market standards that runs from 1950 to 2020. This is more than enough to arrive at some cogent conclusions.

In 2020 the S&P 500 expanded by 16.9%. The benchmark has risen by 9.41% YTD, and this may well be a signal that the US stock market is poised for further growth.

This assumption also looks fairly well justified in terms of fundamentals. It hinges on monetary and fiscal stimulation, i.e. when the aggregate of financial resources is allocated to the real sector of the economy and to support households and business. This money produces a rapid economic effect, which means business is quite capable of developing and expanding.

The medium-term baseline target for the S&P 500 is 4,200, while a more ambitious target on the long-term horizon is 5,000.

 

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