Top JPMorgan strategist explains how stocks hit 'market nirvana' in 2021

Published Thu, Dec 10 20203:03 PM EST

Jesse Pound @/in/jesse-pound @jesserpound

(This story is for CNBC Pro subscribers only). One of JPMorgan's top strategists explained on Thursday how a "market nirvana" could push the S & P 500 nearly 20% higher by the end of next year. The bank released its 2021 forecast this week, setting its base case target for the S & P 500 at 4,400 for the end of 2021 . Dubravko Lakos-Bujas, the bank's chief U.S. equity strategist, explained the reasoning behind the bullish outlook on CNBC's " Halftime Report ." "We're basically seeing one of the best environments for equities in a number of years. You've seen a lot of risks that the market has basically had to cope with and struggled with, ranging from a global trade war, obviously the pandemic this year, all of the uncertainty around U.S. politics and the election," Lakos-Bujas said. "A lot of these risks are subsiding." Top Wall Street strategists have projected the stock market will continue its rally in 2021, as the rollout of Covid-19 vaccines helps boost an economic recovery. Lakos-Bujas sees the overall rise for the market driven by "epicenter" stocks most tied to that recovery. The strategist pointed to cash on balance sheets of S & P 500 companies as another potential boost to stocks through investment, acquisitions and buybacks. Lakos-Bujas also said that reduced uncertainty and greater visibility into the years ahead will help extend multiple expansion in the market, allowing stock prices to drift higher. Despite the widely held expectation of rising stocks and a recovering economy, Lakos-Bujas waved off the risk of group think in the short term. He conceded that some complacency is building, but said periods of multiple expansion, especially those bolstered by "unprecedented liquidity injection," can persist. "And that's why, while I think there is uneasiness, I think that's one of the reasons the market basically continues to grind higher," Lakos-Bujas said. "And I don't see any of these big tailwinds being sort of pulled out of the market." Lakos-Bujas highlighted consumer discretionary, financials, health care and energy as the sectors he sees best positioned going into next year. He said now is the time for investors to add risk to their portfolios. "We will see days when there will be pullbacks, we will see days when there will be nervousness. But I think the big picture here for the next six to 12 months remains a very positive story," Lakos-Bujas said. The strategist also explained why he didn't see the January Senate run-offs in Georgia as a major risk to stocks. Watch the full interview above.

Dubravko Lakos-Bujas. Head of U.S. Equity Strategy, JP Morgan

Scott Mlyn | CNBC

(This story is for CNBC Pro subscribers only).

One of JPMorgan's top strategists explained on Thursday how a "market nirvana" could push the S&P 500 nearly 20% higher by the end of next year.

The bank released its 2021 forecast this week, setting its base case target for the S&P 500 at 4,400 for the end of 2021. Dubravko Lakos-Bujas, the bank's chief U.S. equity strategist, explained the reasoning behind the bullish outlook on CNBC's "Halftime Report."