Credit Suisse is already hiking its 2021 stock market forecast on Democrat policies, reopening

Published Thu, Jan 7 20219:34 AM EST

(This story is for CNBC PRO subscribers only.) We're just seven days into the New Year, and Credit Suisse is already raising its forecast based on supportive Democratic policies and pent up demand once things return to normal from Covid. On Thursday the firm, led by chief U.S. equity strategist Jonathan Golub, lifted its 2021 S & P 500 target from 4,050 to 4,200, representing a 12% upside from where the benchmark index closed on Wednesday. The firm upgraded pro-cyclical sectors, arguing that they will be the ones to drive the market higher. "Encumbered spending and government stimulus has resulted in increased savings," Credit Suisse said. "When the economy reopens, this will likely be spent." The call comes as Democrats prepare to take control of the Senate, after Democrats Jon Ossoff and Raphael Warnock proved victorious in the Georgia Senate runoffs, according to projections from NBC News. The win means Democrats will control the White House as well as both chambers of Congress, making it easier to push through some key policy initiatives. "This [Democrats controlling the Senate] should result in additional stimulus, including the expansion of payments to individuals," noted Golub. Credit Suisse projects earnings to grow by 25% in 2021, to $175. This is up from the firm's prior forecast, established in November , of $168 in earnings per share for 2021. For 2022, the firm expects growth of $14% to $200. That's up from a prior target of $190. Golub said cyclical areas stand to lead the market higher on the heels of Democrats taking control of Washington and the ongoing distribution of the Covid vaccine. "While the timeline for vaccination rollouts has proven underwhelming, the likely avalanche of pent-up consumer demand cannot be ignored. Any additional stimulus will further fan these flames," he said. Given this, Credit Suisse upgraded the discretionary (not including internet retail), industrials, materials and energy sectors to overweight. At the same time, technology, communications and internet retail were lowered to market weight. Health care and financials remain the firm's highest conviction trades. The rotation into value names has been underway for some time as positive updates on Covid vaccines sparked investors to pick up shares in some of the hardest hit areas of the market. In the last three months the Russell 1000 Value has gained nearly 15%, while the Russell 1000 Growth has lagged, gaining 7%. According to data compiled by CNBC , Golub's target is at the high-end of analysts' forecasts. JPMorgan currently has the highest target at 4,400, while Citi and Bank of America are the least bullish, with targets of 3,800. - CNBC's Michael Bloom contributed reporting.

A Wall Street sign is seen near the New York Stock Exchange (NYSE) in the financial district in New York, November 24, 2020.

Brendan McDermid | Reuters

(This story is for CNBC PRO subscribers only.)

We're just seven days into the New Year, and Credit Suisse is already raising its forecast based on supportive Democratic policies and pent up demand once things return to normal from Covid.

On Thursday the firm, led by chief U.S. equity strategist Jonathan Golub, lifted its 2021 S&P 500 target from 4,050 to 4,200, representing a 12% upside from where the benchmark index closed on Wednesday. The firm upgraded pro-cyclical sectors, arguing that they will be the ones to drive the market higher.