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Karishma Vanjani
Less than a week since the news of a Trump 2.0 presidency, the S&P 500 has already smashed through new barriers. Wall Street is thrilled that the uncertainty surrounding the election is over, and that the incoming administration has promised a grab bag of tax cuts.
The veteran stock watcher Ed Yardeni expects the party to continue. Over the weekend, he raised his forecasts for the market benchmark, lifting his call to 10,000 for the close of the decade, at the end of 2029, from the 8000 he forecast on Oct. 18.
At the time, his estimates reflected expectations that profit margins for companies in the S&P 500 companies will take off in response to a productivity boom led by America's technology companies. Yardeni called it the Roaring 2020s scenario.
Now, "animal spirits are back," with the potential for bigger gains, Yardeni wrote on Sunday. He expects that President-elect Donald Trump will quickly lower the corporate tax rate from 21% to 15%. As a result of the tax cuts, potential deregulation, and faster productivity growth, Yardeni believes, profit margins on the S&P 500 will reach record highs of 13.9% and 14.9% over the next two years.
"We also expect that the animal spirits will intensify as the wars between Russia and Ukraine and in the Middle East are resolved sooner rather than later," he said.
In the near term, his estimates call for the S&P 500 to end 2024 at 6100, reaching 7000 in 2025, and 8000 in 2026. The market is already close to the estimate for this year, closing at a record 5995.6 on Friday. It briefly broke through 6000 during intraday trading.
The market benchmark has been on fire even without Trump. The S&P 500 has closed at a record high 50 times so far in 2024, thanks to gains made by its biggest companies by market value. On that list are Apple, Nvidia, Microsoft, Alphabet, Amazon.com, Meta Platforms, Berkshire Hathaway, Tesla, and Broadcom.
According to Torsten Sløk, chief economist at Apollo Global Management, going back to 1954, the stock market has closed at a record high an average of just 18 times a year. That number includes years when no records were set. The average is 29 looking only at years where there was at least one record high, Dow Jones Market Data found.
2029, when Yardeni expects the market to hit 10,000, will be the first year on the job for whoever succeeds Trump as president.
Write to Karishma Vanjani at karishma.vanjani@dowjones.com.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 11, 2024 10:29 ET (15:29 GMT)
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