NEW YORK — XP Investments is betting on a continuation of the U.S. equity markets rally, boosting the year-end target for the Standard & Poor’s 500 index to 4,750 points from 4,550 points, the Latinamerican investment bank said in a research note to clients dated October 21.

“We believed that an upcoming “Santa Rally” will force the market higher by another +/- 200 point going into the year-end,” Alberto J. Bernal, Chief Global & EM Strategist, wrote in the report. “We believe a lingering massive stock of “dry powder” will continue to prove a key support for valuations (+/- 4.5 trillion sitting in money market funds plus USD 12.3 trillion sitting in negative yielding bonds),” Bernal added.

The new forecast is consistent with the SPX trading at 23 times t+1 earnings and 27.6 times current market consensus earnings, according to the report titled “Global Macro Strategy”. The 30-year average current SPX PE ratio stands at 20 with a standard deviation of 4. “In other words, the SPX is clearly quite expensive from a historical perspective.”

The S&P 500 inched higher to a record close Thursday, continuing a weekslong upward march driven by strong corporate earnings and optimistic numbers on the labor market, The Wall Street Journal reported on its website. Thursday’s close of 4549.78, up 13.59 points, or 0.3%, eclipsed a September peak in the index, which had stumbled last month on worries about Chinese growth and stubbornly stuck supply chains, the newspaper said. Thursday marked seven straight days of gains for the index, and its 55th record close of the year. The tech-focused Nasdaq Composite Index rose 94.02 points, or 0.6%, to 15215.70.

XP Investments projects the U.S. economy will expand 5.3% y/y this year and 3.8% y/y in 2022. “The largest risk to future market performance remains the possibility of the Fed being aggressively behind the curve, and, hence, inflation expectations becoming unanchored,” the analyst said in the study. “We think that 2022 will be a much harder year for the SPX, following the likely decision by the Fed to start the tapering process this coming December, plus the earnings growth comparison base becoming increasingly complicated as we move forward.”

The New York-based investment bank expects the U.S. Federal Reserve will announce tapering guidelines in the November 2nd-3rd meeting, with the process starting in December.