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A potential COVID-19 vaccine and bets of an economic rebound in 2021 will lift the S&P 500 to 3,600 by the end of the year, Goldman Sachs Group Inc. said, bumping its target for the index by 20 per cent as it trades within striking distance of a record high.

The benchmark S&P 500 has surged 54 per cent since a coronavirus-driven crash in March as investors piled into equities on the back of historic fiscal and monetary stimulus, but soaring unemployment and a deep economic recession have so far kept the index from reclaiming its record high.

With U.S. gross domestic product plunging at its steepest pace since the Great Depression in the second quarter, Goldman said investors were more focused on a recovery in 2021, when it expects GDP to rise by 6.4 per cent and earnings for S&P 500 companies to jump 30 per cent.

Analysts polled by Refinitiv expect earnings for the companies to rise 28.3 per cent next year after a 20.3-per-cent plunge in 2020.

A part of the stock market jump will also be powered by lower “equity risk premiums,” which are a combination of expected economic growth and investor confidence, as traders shrug off simmering U.S.-China tensions and uncertainties linked to the U.S. presidential election in November, strategists at the Wall Street bank said.

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