Brendan McDermid / Reuters
- Investors should be prepared for a short-term pullback in the first quarter of 2021, according to CFRA’s Sam Stovall.
- “The national stock markets seem to us to have overestimated the economic recovery and EPS in the second half of 2021 … and therefore could be vulnerable to a decline in the first quarter ” the chief investment strategist said in a note to clients on Wednesday.
- Stovall also sees the S&P 500 reaching 4,080 by the end of 2021, an increase of 9.5% from current levels.
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Investors should be prepared for a short-term pullback in the first quarter of 2021, according to CFRA’s Sam Stovall.
The positive vaccine news has left many investors hopeful that the economy will reopen and recover in the summer of 2021. Stovall explained that the market is now showing signs that investors are overestimating a recovery in the market. economy and profits in the second half of 2021.
“National equity markets seem to us to have overestimated the economic recovery and EPS in the second half of 2021 … and therefore could be vulnerable to a decline in the first quarter,” the chief investment strategist said Wednesday in a note to clients.
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Stovall noted that the Russell 2000 is currently more than 30% above its 200-day moving average, and that the 12-month return differential for the S&P 500 growth indices remains at a level not seen since December 1999, shortly before the “Dotcom” burst of the bubble.
However, the chief strategist sees the S&P 500 gaining 9.5% in 2021. He reiterated his 12-month price target for the benchmark 4080, a sign that 2021 will be a positive year for stocks.
Stovall recommends that investors maintain an overweight stance in consumer discretionary stocks, healthcare, industrials and materials. He recommends investors underweight utilities, real estate and consumer staples.
