Our new S&P 500 year-end 2021 price target is 4700 (previously 4300), representing 7% upside from current levels. Our year-end 2022 target is 4900 (previously 4600), 11% above the current level.
Earnings: We raise our EPS estimates to $207 (from $193) in 2021 and $212(from $202) in 2022. These represent annual growth of 45% and 2%, respectively, and compare with bottom-up consensus estimates of $201 and $217. Relative to consensus, we expect stronger revenue growth and more pre-tax profit margin expansion as firms successfully manage costs and as high-margin Tech companies become a larger share of the index. Unlike consensus, we assume corporate tax reform passes and is a headwind to EPS in 2022 and beyond. In a scenario with no tax reform our EPS and price targets would be roughly 5% higher.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
