Stock prices fluctuated sharply this week as the yen carry trade unwound, recession fears increased and market volatility took over.
But beneath the surface, the long-term case for stocks continued to hold true this quarter, fueling bullish sentiment on Wall Street. S&P 500 earnings are expected to rise more than 11% in the second quarter, the highest year-over-year earnings growth rate the index has seen since the fourth quarter of 2021.
This is one reason why Julian Emanuel of Evercore ISI calls the recent decline “a buyable correction in a bull market, not the end of the bull market.”
“Earnings drive stocks over the long term,” Emanuel wrote in a note to clients on Thursday. “That 2024 and 2025 (earnings) estimates remain relatively stable despite some signs of strain on the U.S. economy is a good sign as we head into a historically contentious election.”
Nicholas Colas, co-founder of DataTrek, cited corporate earnings as the reason why he remains optimistic about the market despite recent volatility.
“The bottom line is that both earnings and margins are currently extremely healthy, so U.S. companies should be able to maintain high levels of profitability even if a recession occurs over the next 12 months,” Colas wrote in a note to clients on Thursday.
