{"id":126471,"date":"2021-05-27T18:19:36","date_gmt":"2021-05-27T18:19:36","guid":{"rendered":"https:\/\/precoinnews.com\/?p=126471"},"modified":"2021-05-27T18:19:36","modified_gmt":"2021-05-27T18:19:36","slug":"sp-500-has-room-to-run-but-inflation-fears-to-dampen-sentiment","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/markets\/sp-500-has-room-to-run-but-inflation-fears-to-dampen-sentiment\/","title":{"rendered":"S&P 500 has room to run, but inflation fears to dampen sentiment"},"content":{"rendered":"
NEW YORK (Reuters) -The S&P 500 will end the year only about 2.5% above its current level, with concerns over increasing inflationary risks likely to temper some of the enthusiasm for U.S. stocks this year, according to a Reuters poll of strategists.<\/p> The benchmark S&P 500 is already up nearly 12% since the end of 2020, boosted by upbeat prospects for the economy and earnings following economic stimulus and strong distribution of coronavirus vaccines.<\/p>\n By the end of 2021, the index will be at 4,300, a 2.5% gain from its close Monday of 4,197, according to the median forecast of 46 strategists polled by Reuters over the last two weeks.<\/p>\n That forecast is higher than 4,100 in the February Reuters poll, and strategists cited stronger-than-expected earnings so far this year as among reasons for bumping up 2021 forecasts.<\/p>\n Based on the poll, the Dow Jones industrial average will finish this year at 35,500, up about 3.2% from Monday\u2019s close.<\/p>\n \u201cThere\u2019s still some fuel left in the tank\u201d for the stock market, said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute in St. Louis.<\/p>\n \u201cA lot of folks are still coming to grips with the fact that the earnings outlook will be a lot better than was expected even as recently as a few months ago.\u201d<\/p> Wall Street analysts now expect S&P 500 earnings to grow 35.6% in 2021, compared with a forecast of 23.3% growth at the start of the year, according to IBES data from Refinitiv.<\/p>\n Also, even with concerns surrounding inflation, the Fed is likely to remain accommodative \u201cfor some time,\u201d Samana said. Wells Fargo last week raised its year-end 2021 forecast on the S&P 500 to 4,500 from 4,300.<\/p>\n Rising U.S. inflationary risks have spooked investors recently. High inflation raises the potential for an earlier-than-anticipated scaling back of monetary support by central banks and also for reduced corporate profit margins.<\/p>\n Minutes last week from the last Federal Reserve meeting suggested some policymakers were ready to talk about reducing stimulus by tapering bond purchases.<\/p>\n Many strategists in the poll viewed a correction in stocks over the next three months as likely, and several said they saw the U.S. stock market as overvalued at current levels.<\/p>\n Recent inflation concerns have prompted some investors to take profits in technology and other growth stocks that outperformed at the start of the pandemic.<\/p>\n Shares of banks, energy companies and other economically-sensitive names have surged since breakthroughs in COVID-19 vaccines late last year but remain favorites for 2021 among strategists.<\/p>\n \u201cThe question becomes how long are the legs for cyclicals. I do think they\u2019re long enough to last for the rest of 2021,\u201d said Kristina Hooper, chief global market strategist at Invesco in New York.<\/p>\n \u201cIn my base-case scenario, this is going to be a risk-on environment,\u201d said Hooper. Her year-end target on the S&P 500 is 4,450.<\/p>\n (Other stories from the Reuters Q2 global stock markets poll package:)<\/p>\n