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Goldman Sachs sees the S&P 500 surging to 3,600 by year-end

(Reuters) - A potential COVID-19 vaccine and bets of an economic rebound in 2021 will lift the S&P 500 to 3,600 by the end of the year, Goldman Sachs said, bumping its target for the index by 20% as it trades within striking distance of a record high.

The benchmark S&P 500 has surged 54% since a coronavirus-driven crash in March as investors piled into equities on the back of historic fiscal and monetary stimulus, but soaring unemployment and a deep economic recession have so far kept the index from reclaiming its all-time high.

With U.S. gross domestic product plunging at its steepest pace since the Great Depression in the second quarter, Goldman said investors were more focused on a recovery in 2021, when it expects GDP to rise by 6.4% and earnings for S&P 500 companies to jump 30%.

Analysts polled by Refinitiv expect earnings for the companies to rise 28.3% next year following a 20.3% plunge in 2020.

A part of the stock market jump will also be powered by lower "equity risk premiums", which are a combination of expected economic growth and investor confidence, as traders shrug off simmering U.S.-China tensions and uncertainties linked to the U.S. presidential elections in November, strategists at the Wall Street bank said.

A neon tube graph in a communist style room
A neon tube graph in a communist style room

(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Maju Samuel)