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For the second time since last November, BMO’s chief investment strategist Brian Belski has hiked his year-end 2021 price targets for the S&P/TSX Composite Index and S&P 500, citing an unexpectedly robust earnings recovery.

He now expects the TSX to finish the year at 22,000. The TSX Monday closed at 20,594.97, down 49.67 points from Friday’s record high of 20,644.64.

He last raised his earnings forecast and price target on the TSX on May 1, predicting 20,500 would be reached. That itself was a full 1,000 points more than what he envisioned last November when publishing his 2021 outlook.

“With first and second quarter earnings now behind us, it has become abundantly clear that earnings estimates and revisions across the board have struggled to keep pace with the breadth and depth and pure unadulterated strength of the current earnings recovery. In fact, the second quarter marks the fifth consecutive period when TSX earnings have beat upwardly revised estimates by almost double-digit percentage levels,” Mr. Belski said in a note to clients late Monday.

“Furthermore, bottom-up 2021 earnings estimates have now been revised higher by a record 26% since the beginning of the year, the sharpest upward revision for annual EPS estimates in 20 years, and well ahead of the typical 7% downward revision exhibited over the first eight months of the year. As a result, our 2021 EPS target is once again at risk of being too low as the earnings recovery has continued to defy even our very optimistic expectations for the TSX at the beginning of the year.”

He increased his year-end S&P/TSX EPS target to $1,400 from $1,180.

But he noted that his new targets still imply a lower trailing price-to-earnings multiple than previously forecast: 15.7 times versus 17.4. It’s a signal that markets may not be overheating relative to the growth being seen in corporate earnings.

“We believe the sharp rebound in earnings means multiples will likely now fully normalize and even move into discount territory by year-end. Overall, we continue to believe that the TSX will trade at a discount to the more technology-heavy S&P 500,” he said.

Mr. Belski also raised his targets on the S&P 500.

He revised his 2021 S&P 500 EPS target to $210 from $190 and his 2021 year-end S&P 500 price target to 4,800 from 4,500. The index closed at a record 4,528.76 on Monday.

“It appears that we have underestimated the earnings power of U.S. stocks yet again, despite bumping up our 2021 EPS target back in May. And with analysts continuing to raise annual EPS estimates we believe our current EPS target is again likely too low,” Mr. Belski said in a separate note.

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