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Illustration: Eniola Odetunde/Axios

It's the time of year when Wall Street shops are rolling out predictions for where they see the stock market headed in the coming year. There's one common theme: Widespread distribution of a vaccine is the reason to be bullish.

Why it matters: Analysts say vaccines will help the economy heal, corporate profits rebound and stock market continue its upward trajectory.

The big picture: “Despite investor focus on the prospective policy implications of the Biden presidency, the vaccine for COVID-19 is a more important determinant of the path of both the economy and stock market in 2021,” David Kostin, chief U.S. equity strategist at Goldman Sachs, said in the firm’s 2021 outlook.

  • Kostin expects at least one vaccine will be FDA approved and administered to a large swath of the U.S. population next year.
  • UBS — which sees the S&P 500 rising as much as 11% higher from Wednesday's closing price by the end of next year — expects a vaccine will be widely available by the second quarter next year.
  • "That should help put Europe and the U.S. on the path to a sustained recovery," the firm's analysts note. "If we are right, we expect corporate earnings to rebound quickly."
Data: Historical data from Yahoo Finance, select targets from Axios Research; Chart: Andrew Witherspoon/Axios

Between the lines: The markets’ path “will likely be down and then up,” before jumping 6% by the end of next year, according to Bank of America's forecast released Tuesday.

  • Analysts there note “the recovery is intact and the world likely re-opens” in the second half of the year.

Yes, but: A lot of optimism is already priced in from the vaccine and expected economic recovery.

  • And there are several risks that Wall Street is watching, such as a muddled vaccine rollout alongside a virus resurgence and longer economic lockdowns.
  • Plus, there could be a further delay in additional fiscal stimulus.

What they're saying: "Even with recent positive vaccine and treatment developments, the global pandemic and its unprecedented impact is unlikely to fade in coming months," says Brian Belski, chief investment strategist at BMO Capital Markets.

  • He's betting massive fiscal and monetary support will keep coming.
  • BMO says the S&P 500 will end 2021 at 4,200 — a roughly 17% upside to Tuesday's closing price.

The one thing that’s all but certain: accommodative Fed policy for the foreseeable future. (Chicago Fed chair Charles Evans said this week interest rates won’t move higher until late 2023, at the earliest.)

  • More firms are betting the Fed will up the pace of bond buying or at least change up the mix of its purchases — particularly now that its emergency lending programs will lapse at the end of the year.
  • The Fed could also utilize its new policy framework to anchor treasury yields, John Herrmann, rates strategist at MUFG, wrote in a client note on Tuesday.

Go deeper

Jan 29, 2021 - Health

J&J says its one-shot vaccine is 66% effective against moderate to severe COVID

Photo: Thiago Prudêncio/SOPA Images/LightRocket via Getty Images

Johnson & Johnson announced Friday that its single-shot coronavirus vaccine was 66% effective in protecting against moderate to severe COVID-19 disease in Phase 3 trials, which was comprised of nearly 44,000 participants across eight countries.

Between the lines: The vaccine was 72% effective in the U.S., but only 57% effective in South Africa, where a more contagious variant has been spreading. It prevented 85% of severe infections and 100% of hospitalizations and deaths, according to the company.

Stock market has worst week since October amid Reddit frenzy

Photo: Tiffany Hagler-Geard/Bloomberg via Getty Images

Wall Street had its worst week since October as day traders bid up stocks for GameStop, AMC and others that gained popularity on Reddit.

Details: The S&P 500 fell more than 1.9% on Friday. All of the major averages fell more than 3% this week.

Ben Geman, author of Generate
Jan 29, 2021 - Energy & Environment

Electric vehicle sales far surpass pandemic expectations

Data: EIA; Note: 2020 figures are preliminary; Chart: Axios Visuals

New International Energy Agency preliminary data shows that worldwide sales grew by an estimated 40% last year, exceeding the agency's expectations.

Why it matters: The increase occurred despite a drop on overall global vehicle sales.

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