Merrill har lavet scenarier for S&P 500 – indekset for 2021 og 2022. I det optimistiske scenarium kan indekset stige fra det nuværende niveau på ca. 3700 til 4000, måske helt op til 4400. Men i det negative scenarium kan indekset falde til 3400. Det afgørende bliver virksomhedernes indtjening, dollarens kurs og renten.
Scenarios for the S&P 500 through 2022
Since the lows of the year on March 23, the S&P 500 has rallied 65%.
Its forward price-to-earnings (P/E) ratio, (next 12-month basis) has risen to 22x from 14x.
Meanwhile, consensus earnings estimates have risen to $177 for 2021 and $200 for 2022.
There is some level of optimism being discounted in current equity prices for the economic
normalization and earnings recovery expected broadly by investors, and, as such, a
consolidation is likely in the near term.
The table below provides a rough indication of where the S&P 500 index’s central tendency could be, given various scenarios for earnings per share (EPS) in 2022 and P/E multiples.
These scenarios are not official price targets and are not meant to signal levels where
portfolio actions may always be needed. However, during times of market volatility, it’s
useful to keep this basic framework in mind when deciding whether to incrementally add
to or trim risk from portfolios while staying invested in one’s strategic asset allocation
framework.
Base case: The central tendency of the S&P 500 is currently around the 3,800 levels. This
assumes current consensus 2022 EPS estimate of $200 and a forward multiple of 19x. We
assume a rise in global growth as we move through 2021, vaccine deployment leads to the
pandemic becoming less relevant in the second half of 2021, and interest rates likely moving
higher moderately.
Upside scenario: It is likely that earnings estimates will move further higher for 2021 and
2022 as profit margins move back up toward pre-pandemic levels, nominal growth improves,
and the dollar weakens.
This could push the central tendency for the S&P toward the 4,000 range as earnings estimates move higher. In a more optimistic scenario, if multiples also expand (fund flows pick up more sustainably into equities, scarcity premium for stocks rises due to lack of yield and growth in other asset classes, sentiment moves higher into more optimistic levels) then a range of 4,200 – 4,400 is likely achievable.
Downside scenario: If bond yields rise meaningfully, then valuation multiples may face
headwinds. A slight decline in P/E puts the central case for the S&P at 3,600 levels,
assuming earnings rise to levels expected currently.
A lower probability scenario would be if earnings estimates for 2021/2022 also falter due to weaker-than-expected pent-up demand pull-through and an unexpected strength in the dollar. Then the central case for the S&P 500 could move lower to the 3,400 levels.
