Financial Associated Press (Shanghai, editor Huang Junzhi) news, according to reports, U.S. stock market investors in 2021 to achieve a good return, the Standard & Poor's 500 index (s&p 500) hit more than 50 closing highs, so far this year has risen more than 25%.
The current record rally has led some big bears to think about the "bright side" of the stock market as their target price is increasingly different from the benchmark index. Savita Subramanian, an equity analyst at Bank of America, appears to be one of them. Due to high valuations and a bubble in investor sentiment, Subramanian has previously taken a bearish stance on the stock market.
Previously, she had expected the S&P 500 to target 4,250 points by the end of the year, 8% below current levels; the target price at the end of 2022 was 4600 points, or slightly lower than the current level. In addition, Subramanian also forecasts negative returns on equity over the next decade.
But in a recent report released on Tuesday, subramanian was unusually focused on what could continue to drive the stock market higher. Data from Bank of America shows that the following six factors may have driven the stock market higher:
"Today's labor shortages and onshore programs may incentivize businesses to automate and further improve efficiency. Due to the higher labor intensity of the consumer and industrial sectors, they will benefit the most from the benefits of automation. Semiconductors, some technology and industrial industries are likely to benefit the most from increased automation spending. ”
"A discounted infrastructure spending program would allow Democrats to cut the proposed tax bill to a minimum of 15 percent and impose a 1 percent tax on corporate buybacks, meaning earnings per share would be hit by about 1 percent, compared to about 5 percent as estimated by previous bills."
"Commodities provide inflation protection and bonds provide earnings, but neither can be both. Stocks are in the best position to provide both inflation protection and yields. ”
"Government debt/GDP is more than 1.2 times (a record high) and much higher than corporate/household debt/gdp. But the previous peak of government debt/GDP had a good ending. In the former, GDP growth outpaced debt growth, with stocks receiving better returns during and after rising government indebtedness. Looking ahead, based on Biden's revised 'Rebuild a Better Future' plan, our economists believe that deficit expansion will be slower than expected. ”
"A small-cap bull market could also signal upside risk to our long-term forecast for the S&P 500: during the months when small-cap stocks were in the lead, the monthly returns of the S&P 500 were more frequently positive (72% of all monthly returns since 1979, rather than 63%)."
"Given that we believe interest rates will rise from now on, we believe the S&P 500's record 35-year stock duration will have a negative impact." The impact of rising discount rates is far more negative than ever — a 1 percent increase in the cost of stocks would see the S&P 500 fall to around 3600. But conversely, if costs fall by 1%, the S&P 500 will rise to 6300 points. Convexity is important because the risk is asymmetrical: 3600 points represent a 21% decline, while 6300 points represent a 36% rise. ”
Stock duration refers to the number of years it takes for stock investors to recover their investment from stock cash flow, somewhat similar to the price-to-earnings ratio, and the discount rate is an important factor affecting duration.