Hi, I'm Phil Orlando, Chief Equity Strategist at Federated Hermes.
What is your outlook for the equity market long term?
We have a very constructive outlook on the equity market. We believe that the recession ended in May or June of 2020. Although we recognize that the National Bureau of Economic Research is not going to officially date the end of recession until towards the end of calendar 2021. We have accelerated vaccine distribution and that we believe will lead to adult herd immunity in coming months. That should spark a normalization of economic activity. Kids returning to school, adults returning to work. We can go to bars, restaurants and retail stores. We can go to stadium events. We can get our families on a plane to go on vacation. The savings rate right now is double what it is historically about 13 and a half percent in calendar 2021. Versus six and a half percent over the last quarter century. As a result, we think that economic growth, GDP growth will approximate 6.6% in calendar 2021. That is the strongest rate of economic growth we have seen in the United States since 1984. That is going to spark very strong corporate earnings gains. In the first quarter of 2021, we are forecasting earnings gains of about 30 to 35% higher on a year, over year basis. And a gain of 60% in the second quarter of 2021. So we believe that the earnings recession is over. Stocks ultimately will follow earnings higher. We forecasted at 3,800 target to the S&P 500 in 2020 and we are continuing to forecast a 4,500 target for the S&P 500 in calendar 2021.
Disclosure: Views are as of April 27, 2021 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Gross Domestic Product (GDP) is a broad measure of the economy that measures the retail value of goods and services produced in a country. S&P 500 Index: An unmanaged capitalization-weighted index of 500 stocks designated to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Indexes are unmanaged and investments cannot be made in an index. Federated Advisory Services Company, 21-40217 (5/21)