Stocks will reach record highs in 2021, CFRA’s Sam Stovall predicts

What a difference a year may make.

CFRA’s Sam Stovall believes stocks will return to all-time highs in the next 12 months.

“In other bear markets going back to 1929, and the average 13 month advance was 50{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f},” the firm’s chief investment strategist told CNBC’s “Trading Nation” on Monday. “We have a very good possibility of retracing our steps and challenging the old high.”

The S&P 500 closed at its record high of 3,393 on February 19. Stovall’s rolling 12 month price target on the index is 3,435, which reflects a 17{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} jump from current levels.

Despite his bull case, he acknowledges a second deadly coronavirus wave linked to reopening the economy is a serious risk.

“Who’s to say that we don’t go for a retest first? That is a normal situation,” said Stovall. “However, I don’t think we’re going to get an even lower low because of the stimulus already injected into the system.”

According to Stovall, the big difference between the 2020 downturn and the Great Depression is the massive policies the government has put in place to cushion the blow.

“We’ve had a lot of people compare it with the crash of ’29, the depression of the 1930s, etc,” he added. “But back then, you had the government actually tightening their reins, balancing their budget — you did not have a reactive Federal Reserve. Whereas today, you have the exact opposite.”

Prior to the economic shutdown, Stovall warned on March 2’s “Trading Nation” the virus threat would spark a temporary correction, and investors should see stocks back at all-time highs in the third quarter.

His forecast may delayed until next year, but his message is the same: New highs are ahead.

“Wall Street is focusing more on what will be beyond the next 6 to 9 months rather than what could be happening in the next 2 to 3 months,” Stovall said.

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