From Investing.com: 2024-07-07 03:53:02

Alpine Macro strategists believe that despite skepticism, the bull market is set to continue exceeding expectations due to strong earnings growth and a resilient economy. Analysts are trading above their top price targets for the year, with investors underexposed to equities. Mega tech companies and record corporate earnings are driving market performance.

The much-awaited recession has yet to materialize, resulting in a profit recession in some sectors. Mega tech companies are driving large-cap U.S. equity indices forward by being less influenced by macro factors. Their asset-lite characteristics also make them less vulnerable to interest-rate policies.

The ongoing bull market is supported by accelerated corporate earnings exceeding expectations. Sectors that went through rolling recessions are now experiencing stabilizing revenues and expanding profit margins. Historical trends suggest profit margins will rebound soon after major cycle troughs, indicating more upside potential.

Alpine Macro analysts project corporate earnings to be around $59 in Q2 and closer to $250 on an annual basis, with an even better outlook close to $250 for the year. An aggressive bull thesis includes a potential “catch-up” move for the broader market to align with the high valuations of Mega Cap leaders, impacting the value of the S&P 500.

Their fair-value valuation model suggests a fair-value P/E multiple of 20x, leading to a price level of 5,200 for the entire index. However, anticipating the trajectory of earnings growth, applying this multiple to the rest of the index while maintaining Mega Tech valuations could result in a price level of 5,700, a reasonable intermediate target.



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