Why Wall Street is increasing its 2021 price targets
Yahoo Finance’s Myles Udland, Brian Sozzi and Julie Hyman breaks down why 2021 provides a ‘perfect backdrop’ for the stock market.
Video Transcript
MYLES UDLAND: And just want to highlight something that we wrote about earlier today in the Yahoo Finance Morning Brief. Of course, you can get that sent to your inbox every day right around 6:00 AM. And this is Wall Street strategists already revising their 2021 outlook. Sean Darby over at Jefferies had a 3,750 target on the S&P 500 for the end of 2021. That was published back on November the 6th, just a few days after the presidential election.
And now, he's looking for 4,200 for the S&P 500 by the end of next year. And that's far from the most bullish that we've seen from any analysts on Wall Street. I really think Goldman Sachs David Kostin and the team over there set the tone for where Wall Street commentary is at, with a 4,300 price target on the S&P 500.
And so, you know, Julie, I think we talked yesterday a little bit with Liz Ann Sonders at Charles Schwab about the exercise of putting a price target on the S&P. But ultimately, it's kind of just the analysts showing their work, showing their work on the math. We think that this is how much earnings S&P 500 companies are going to earn next year.
This is how much we think investors are going to pay for it. And that, you know, that formula gets you to a certain price target on the S&P. And I think maybe it all, you know, and it's self-fulfilling, right? People see 4,000 on the S&P, right now we're trading just under 3,700. What's another 300 points between friends?
JULIE HYMAN: Right. I mean, to Liz Ann's point, she kind of said it's a fool's errand to try to put a specific exact number on it because as we all know, who have been tracking the markets for as long as we have, you know, predictability factor is challenging, at best when you're looking at these markets. But directionally, what actually tends to happen is that these guys undershoot frequently, especially in rally years when you don't have a shock, if you will, coming out of nowhere.
And even in this year when we had a shock coming out of nowhere, stocks are still going to perform better than many of these strategists had predicted. So maybe take these and add another 300 points between friends, Myles, I don't know.
MYLES UDLAND: Maybe. And, you know, Brian Sozzi, I think when you look at these big round numbers on all of these indexes and we can-- I don't think the public really cares if the S&P, it's 4,000, right? But the public certainly knows the Dow is at 30,000. And all of these things feed together. And I think, again, I brought up the cost in point. The roaring '20s, that was great, I guess. You know, that F. Scott Fitzgerald seemed to have a good time. But we know what happened after that, and I think it's-- it'll be interesting to see how much that thesis plays out not just next year, but, you know, what's 2024 look like? Does 2024 look like 2018 again in a lot of ways, or does it actually take on some shape of whatever the future might be?
BRIAN SOZZI: I feel you, Myles. But I'm going hard right turn right now. Just exchanged a follow-up email with Playboy CEO Ben Cohen was just on with us. He says, quote, "We have sold so much, I need more inventory." I guess it's all about those benzocaine wipes over at Playboy, guys.
JULIE HYMAN: Yeah, forget about Gen Z not not having sex anymore, Myles. I guess that puts that to bed.
MYLES UDLAND: Look, I'm, you know, I'm young in my professional career. I try to keep it straight here. A little shook during the interview. I unfortunately called Ben Mike, who was the name of our prior guest. You know, look. You live and learn. You live and learn as you go through this job. All right, that's going to do--
