US Stocks Poised to Reach New All-Time Highs as Economy Thrives
Stocks in the US are expected to hit new all-time highs as the economy continues to thrive, according to Wharton professor Jeremy Siegel. In an interview with CNBC, Siegel expressed his optimism about the market, citing lower inflation, a stronger economy, positive guidance, and good profits as driving factors.
Siegel believes that the S&P 500, which is currently trading just 4% below its all-time high of 4,796 reached in January 2022, could soon break through to a new record. The professor’s outlook on stocks has become more positive in recent months, despite previously warning of a potential recession. The market’s rally has been supported by various bullish factors, including strong corporate profits and a broader rally in stocks, with a larger percentage of stocks participating in the upward trend.
Data from FactSet reveals that 80% of the S&P 500 companies that have reported their second-quarter financials so far have surpassed analysts’ expectations for earnings. Additionally, Refinitiv data shows that around 70% of S&P 500 firms are trading above their 200-day moving average.
Contrary to earlier predictions of a downturn, the US economy has demonstrated strength, with GDP growing by 2.4% in the second quarter and 2% in the first quarter. The Employment Cost Index also indicates a promising trend, showing that wages and salaries increased by just 1% from March, suggesting that inflation is cooling.
Siegel dismissed concerns from market pessimists who believe that the hype around artificial intelligence is creating a bubble in stocks. Comparing today’s valuations to those during the dot-com bubble of the early 2000s, Siegel pointed out that the S&P 500 is currently trading at around 20 times its 12-month forecasted earnings, whereas back then, it was selling at 30 times its forecasted earnings. Additionally, interest rates during the dot-com bubble were higher than they are now.
Tom Lee, from Fundstrat, shares Siegel’s bullish outlook on the stock market. Lee predicts that the S&P 500 could reach a new record in 2023 and has estimated that the index could reach 4,825 by year-end if it overcomes three key hurdles.
As the US economy continues to perform well and corporate earnings remain strong, experts like Siegel and Lee foresee stocks reaching new all-time highs. With positive economic indicators and a bull market in full swing, investors are optimistic about future market performance.
