Why the Stock Market Might Easily Go Up Another 20%
Economic expectations are poised to improve and the U.S. equities market could surge as "headwinds have become tailwinds," according to analysts at Canaccord Genuity.
"The combination of a domestic reacceleration, the weakened U.S. dollar and a global synchronized recovery should allow for better than expected economic and earnings growth as we move into 2018," the analysts said in a note on Friday, Sept. 8.
Canaccord set a target of 2,800 for the S&P 500 in 2018, implying about a 14% upside from where the index stood early Friday. Analysts added that the market historically correlates with earnings, which are driven by economic activity -- which has been reaccelerating - but could skew in the near-term following hurricanes Harvey and Irma.
Millennials are "likely to represent an increasing percentage of income and spending as they age," offering a boost to economic activity. At the same time, confidence levels for consumers and small businesses remain high as the "animal spirits" are driven by assumptions that taxes will not increase and regulations are being eased out of Washington.
Canaccord analysts' positive thesis has "gotten stronger" as consumer and business spending outlooks increase. Capital spending, which had been slower than normal this cycle, is set to rise as fears of increased regulation and taxes are squashed.
Analysts added that "the underappreciated economic reacceleration causes [them] to favor the 'pro-growth' sectors such as Financials, Industrials, Materials and to a lesser degree Energy Sectors."
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