Revising S&P 500 target to 4250 on strengthening earnings expansionAs equities de-rate amidst the jump in rates, much better than expected earnings shoulddrive further S&P 500 upside through 2021. We raise our S&P 500 price target for yearendto 4250, from 4100, on higher forecasted EPS of $188 for 2021 and $218 for 2022.Our ~$10 upgrade stems from greater stimulus, an acceleration in consumer spendingand even stronger Q4 EPS than we expected. EPS of $218 is just a 10% CAGR from '19to '22e with ~$5tr of stimulus (thus far). Our target assumes a forward P/E of 19.5x,which is about 2x below the current level as rates rise, earnings go well above trend andtaxes are increased. The S&P 500 forward P/E was ~18.5x in Dec '19 when the 10y yieldwas nearly 2% and real yields were +15bp. Thus, we still see risks tilted to the upside.Reassessing the risks: growth asymmetry vs. rates to the upside, tax/reg keyThis time is different. With such unprecedented cross-currents, we use our frameworksto quantify the potential upside and downside impacts, relative to our baseline, forvarious catalysts and drivers. We see the upside case of even stronger consumption(+5%), pricing power (+6%) and higher 3-5yr growth expectations (+10%), offset byeven higher rates (-6%) and less liquidity (-4%) as still pointing to net >10% incrementalreturns. The political stance is key with even higher cap gains and corp taxes as well as

greater regulation a total -12% type overhang in our estimate.