FXStreet reports that strategists at Capital Economics said that there are clearly risks to the S&P 500 outlook, such as the president’s plan to raise corporate taxes and a potential antitrust drive.

“Just because analysts appear to have underestimated the scale of the rebound in earnings in Q1 doesn’t mean that they are being too conservative about the future. On the contrary, they seem to be very optimistic even allowing for the fact that the US economy is likely to fare especially well during the rest of this year and next.”

“The implication is that EPS will have to perform even better than analysts are forecasting in general between now and the end of 2022 if the S&P 500 is to get a boost from this source. We think that is unlikely, despite our positive view of the US economy.”

“Even if analysts stop revising up their forecasts for EPS, the S&P 500 could still get a boost if its valuation continues to climb. But the price investors are willing to pay for earnings is already at a lofty level. The S&P 500 will barely make any more headway in 2021 – our end -year forecast is 4,200 – and eke out only small gains in 2022 and 2023.”