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Illustration: Trent Joaquin/Axios

Even with Monday’s stock market swoon, the S&P 500 could still rally to 5,000 within the next two years.

Why it matters: A big round number like 5,000 may seem like a stretch. But it's really not if you consider the historical precedents and the fundamentals, which support the case for reaching that milestone from its 4,258 close on Monday.

What they’re saying: "If the economy continues to expand post-COVID, and companies continue to prosper in this new world, S&P 5,000 over the next two years seems very doable," Baird market strategist Michael Antonelli tells Axios.

By the numbers: To get to 5,000, the S&P 500 would have to gain a little over 8% per year for two years. This compares to a longer-term average return of about 10%.

  • "We are currently in year two of the bull market," LPL Financial’s Ryan Detrick tells Axios. "So the key is this is actually still a young bull and higher than average returns are possible."
  • He notes that the S&P produced gains in each of the last five full months, a pattern which on average is followed by another 13% gain in the next 12 months. This gets you most of the way to 5,000.

Threat level: The Federal Reserve is expected to hike interest rates within the next two years, which could cool valuations, says DataTrek Research co-founder Nicholas Colas.

  • Strong earnings growth could fuel a broad rally that gets the S&P to 5,000 in two years, but it "feels like a stretch," he says.

The intrigue: Instead, Colas argues it’s more probable that milestone will be achieved thanks to a handful of massive, high-growth tech names: Alphabet, Amazon, Apple, Facebook and Microsoft.

  • "If those 5 stocks each gain 30% over the next 2 years, that would be worth 6.6 percentage points of overall S&P gains," he wrote last week.
  • This path would require the other 495 stocks in the S&P to generate mid-single-digit gains per year for the index to get to 5,000 in two years, Colas says.

The bottom line: Forecasts for further stock market gains would be much more doubtful if they weren’t backed by fundamentals. But the underlying economy continues to be one that’s got a lot of pent-up demand coming from consumers with a lot of spending capacity.

Go deeper

Oct 25, 2021 - Technology

Facebook beats earnings, but misses on revenue

Photo illustration by Chesnot/Getty Images

Facebook's stock jumped marginally in after-hours trading Monday after the company beat Wall Street expectations on earnings per share but missed estimates on revenue.

Between the lines: Facebook warned investors last month that changes to Apple’s privacy rules would weigh on its business, and that warning helped the company dodge a big stock slide today.

FAA clears more planes after 5G fears

Photo: David McNew/Getty Images

The Federal Aviation Administration said Thursday it had approved nearly 80% of the U.S. commercial fleet to perform low-visibility landings at airports with new 5G services after fears of signal interference limited 5G rollout.

Why it matters: The FAA approvals will help provide more certainty after the agency raised fears that 5G signals could reduce the accuracy of certain equipment, known as radio altimeters, that helps planes land and take off in inclement weather.

Dan Primack, author of Pro Rata
3 hours ago - Economy & Business

Peloton stock tanks on report of production halt

Illustration: Aïda Amer/Axios

Peloton stock fell by as much as 25% on Thursday, following a CNBC report that the connected fitness company will temporarily halt production on its bikes and treadmills.

Why it matters: Peloton is viewed by many as a proxy for consumer behavior in the pandemic era, as its popularity surged when gyms closed and people wanted to exercise at home.