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Credit Suisse’s Jonathan Golub on 2021 outlook

Credit Suisse Securities Chief U.S. Equity Strategist Jonathan Golub joins Yahoo Finance Live to discuss his outlook for 2021, including why he sees the S&P 500 going to 4050 by the end of year, and his sector picks.

Video Transcript

MYLES UDLAND: Let's talk a bit about what's going on in the markets today and also what we could expect next year. For that conversation, we're joined now by Jonathan Golub. He is the chief US equity strategist over at Credit Suisse.

Jon, it's great to talk with you on this Wednesday. I'd love to begin by talking about your 2021 outlook 40, 50 for the S&P. How do you get there? And what is this recent rally? I mean, November has been just a crazy month. Does that change at all how you're thinking about next year?

JONATHAN GOLUB: Right, and first, it's really important to separate what's going on now and what your outlook is for the next 12 or 14 months. Near term, you have just fantastic news on these vaccines. I had a conversation with my parents. I think it was yesterday or the day before. And I said to them by February or latest March, you'll be out, about, doing what you would normally do without any concern.

And while it may take the general public a little bit longer to all get the vaccine, we are clearly on the road to recovery, and that's great news. The efficacy of these drugs is just unbelievable. I mean, we're talking about we take a family cruise next winter. I mean, those are things that we didn't think we would ever say.

As far as the move that we had on Monday, that was-- I'm sorry, yesterday. That was really about Janet Yellen getting the nod from the Biden administration or the upcoming Biden administration about a Treasury roll there. And that is really very good news for the markets.

And I think in general, the first thing that you see from any President-elect is what his selection of cabinet members is. There was a lot of concern that Biden was going to be more progressive in the cabinet, which would be market unfriendly. And that's not happening. This looks like it's kind of down the middle of the fairway.

So between what we're seeing, you know, in terms of potential appointees, as well as the vaccine, the market actually has pretty good reason to want to celebrate right now.

JULIE HYMAN: And it certainly has been celebrating, Jon. You're looking at a target for next year, 40, 50. So, more upside. And, in fact, most of your peers are around those levels, right? 4,000 or above or so. You know, when everybody is-- seems super bullish-- a lot of people coming on the show are quite bullish right now-- it always makes me a little nervous. And listen, I'm not a strategist. I'm frequently wrong. But I just wonder, when you're thinking through it, what are the sort of risks to your forecast?

JONATHAN GOLUB: All right, so let's actually-- let's break it down into two conversations. The first one is, how do we even think about it? How does a Wall Street strategist come up with a market target? And the second is, what are the risks? And matter of fact, when we put out a report on our target, right on the cover, we say, here are all the things that could go wrong. So it's a great question.

But as far as how do we do this, we don't say, what do I think is going to transpire over the next 12 months? If you're a really good strategist, that's not what you focus on. You ask a different question, which is, imagine for a moment that you're sitting on a hilltop, and it's the end of 2021. And you're looking out into the future. You're looking into '22 and '23. And you're trying to figure out in a year from now, what will the future look like? And that's where stocks are going to end this year.

And so, when you're sitting on that hilltop, what do you see? The virus is gone. We have maybe not every single person is vaccinated, but the pandemic is over. The economy is growing at an above normal pace. GDP is going to be strong. But in a strange way, GDP is strong, but actually-- it's actually strong, but slowing a little bit.

You have interest rates which are creeping back up a little bit towards normal. They're not going to be 2% or 3%, but they could be 1 and 1/4% or 1 and 1/2%, which is a very good thing for banks. It's a really good thing for savers and retirees. And people are thinking about, you know, about their retirement. So we can keep going. If you look at volatility, volatility will be lower. And every one of the things that I'm saying is very, very market positive. Returning to normal is a beautiful thing.

MYLES UDLAND: And, you know, Jon, I think it's a great way to say it. It's why our editor Sam Rowe had a great headline on the story about your note. You guys are bullish in 2021 because you're bullish on 2022. And I think it's a great framework for our viewers to kind of think about. Jon, you're going to stick with us.