Goldman sees the S&P 500 rallying to 4,300 by end of 2021 on vaccine, divided government

The Wall Street Bull (The Charging Bull) is seen during Covid-19 pandemic in Lower Manhattan, New York City, United States on May 26, 2020.
Tayfun Coskun | Anadolu Agency | Getty Images

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Goldman Sachs has turned more bullish about the stock market on the back of the promising vaccine news and a divided U.S. government, now expecting a gain north of 20% for the S&P 500 by the end of next year.

The Wall Street firm on Wednesday hiked its year-end S&P 500 target to 3,700 from 3,600, a 4% rise from Tuesday's close of 3,545.53. By the end of 2021, Goldman expects the broad equity benchmark to rally to 4,300 — a 21% gain from the current level. The bank sees the S&P 500 reaching 4,600 by the end of 2022.

"A vaccine is a more important development for the economy and markets than the prospective policies of a Biden presidency," David Kostin, the bank's chief U.S. equity strategy, said in a note Wednesday. "The much-awaited results from Pfizer (PFE) that its COVID-19 vaccine has an efficacy rate greater than 90% is a positive event that will allow society to gradually normalize during 2021."