This Bull Market has More Room to Run

#market #earnings #growth #value


US companies earnings’ are coming in above expectations in Q-1, giving investors strong confirmation that profit growth will continue to support the market this yr“– Paul Ebeling

A big piece of the strong earnings growth is coming from tech and growth companies, suggesting greater durability in companies that underperformed more economically focused value names for the last few months months.

So far, about 87% of reports have come in ahead of analysts’ estimates for EPS putting Q-1 Y 2021 on pace to have the highest beat rate on record going back to Y 1994, when Refinitiv began tracking the data.

Our work shows that the stronger-than-expected earnings will drive this market further North. The benchmark S&P 500 is trading at about 23X forward earnings, above the long-average of about 15X.

The earnings results are really not fully priced in yet because estimates for 2-H of the yr start to pick up now in response to the better-than expected environment. That augurs more room for the Bull to run.

That being the case, Friday, I raised our Y 2021 S&P 500 price target to 4,700 from 4,250. The S&P 500 index was at 4,181.17 at the close Friday 30 April.

Stocks have had little reaction to earnings overall so far.

The S&P 500 is up 11%+ YTD. But, it is up less than 2% since mid-April when the earnings period kicked in, but near record highs.

Earnings are raising Big Q’s in the debate over growth Vs value. After 10 yrs of under-performing the overall market, value has been a favorite among some investors betting on the reopening of the US economy. But, tech is a reopening play too.

The risks of higher inflation and the possibly, but not likely, higher taxes have some investors looking cautiously at growth shares in here.

Friday, the benchmark US stock market indexes finished at: DJIA -185.51 to 33874.85, NAS Comp -119.86 to 13962.71, S&P 500 -30.30 to 4181.17

Volume: Trade on the NYSE came in at 1.2-B/shares exchanged

HeffX-LTN’s overall technical outlook for the major US stock market indexes is Bullish to Very Bullish as of the end of April 2021.

  • Russell 2000 +14.8% YTD
  • S&P 500 +11.3% YTD
  • DJIA +10.7% YTD
  • NAS Comp +8.3% YTD

Looking Ahead: Investors will receive the ISM Manufacturing Index for April, Construction Spending for March, and the final IHS Markit Manufacturing PMI for April Monday.

Have a healthy weekend, Keep the Faith!

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