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Increases in equity prices have been underpinned by high levels of liquidity (thanks to central banks). Small and medium cap stocks have fared well in early 2021, with a more predictable turn to cyclical companies too. Technology stocks also remain in demand, despite some recent worries about the implications of higher interest rates. All in all, equities are likely to make further gains over the next 12 months, with rises in bond yields being insufficient to undermine the appeal of equities, per Deutsche Bank.

See:  S&P 500 Index to continue its climb to 4200 in 2021 – Commerzbank

Key quotes

“Earnings estimates will be revised up as the economy picks up pace and the region continues to benefit from the importance of relatively resilient technology, healthcare and communication stocks.  

“Earnings per share may be back to pre-pandemic levels by Q4 2021.”  

“Valuations are still very high but fair vs. bonds, with earnings likely to be the driver in future rather than multiples.”  

“Small and mid-caps could benefit particularly in the short term from the recovery, with indices having a higher exposure to growth stocks.”  

“End-March 2022 S&P 500 forecast 4,100.”