JPMorgan Raised Its S&P 500 Price Target — Before Tuesday’s Rally. Here’s Why.

3 years ago 311

By William Philip

Updated July 20, 2021 9:12 p.m. ET / Original July 20, 2021 8:56 p.m. ET

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When the Dow Jones Industrial Average dropped much than 700 points connected Monday, it didn’t deter the bullish strategists astatine JPMorgan. Instead, they got much bullish, raising their year-end S&P 500 people from 4400 to 4600—before Tuesday’s large rally.

What did they see? JPMorgan’s Dubravko Lakos-Bujas believes that improving fundamentals successful the labour marketplace combined with casual monetary argumentation and grounds household savings volition proceed to boost the banal market, adjacent arsenic galore marketplace watchers foretell much downside ahead.

It each comes down to earnings. Lakos-Bujas believes that statement estimates stay conservative. That means they volition proceed to acquisition affirmative revisions done 2023. As a result, helium has raised his S&P 500 earnings-per-share estimation by different $5 to $230 for 2022—above statement estimates of $214. Lakos-Bujas is besides of the sentiment that profit borderline estimates are excessively low. Current statement borderline estimates presume that margins volition alteration by 0.9%, portion Lakos-Bujas suggests that companies volition beryllium capable to walk costs connected to consumers successful bid to support their profits.

Larger buybacks successful the coming quarters volition further spur returns. The Federal Reserve, for instance, has allowed banks to bargain backmost banal again aft limiting repurchases and dividends successful bid to conserve superior during the pandemic crisis. Already, buyback announcements person exceeded 2020 levels with $431 cardinal successful announced buybacks twelvemonth to day compared with $307 cardinal implicit the aforesaid play past year. Lakos-Bujas sees gross buybacks surpassing $850 cardinal by the extremity of the twelvemonth acknowledgment to grounds nett margins and cheaper financing.

The timing of Lakos-Bujas couldn’t person been better. The S&P 500 finished up 1.5% connected Tuesday, portion the Dow Jones Industrial Average gained1.6%.

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