Stocks tumbled this week as yen carry trades unraveled, recession fears grew and volatility prevailed in the market.
But behind the scenes, the long-term outlook for stocks remains strong this quarter, fueling a bull market in some stocks on Wall Street. Second-quarter earnings for the S&P 500 index are expected to increase by more than 11%, marking the highest year-over-year profit increase reported by the index since the fourth quarter of 2021.
This is one reason why Evercore ISI’s Julien Emanuel calls the recent pullback “not the end of a bull market, but a buyable correction in a bull market.”
“Over the long term, earnings drive stock prices,” Emanuel wrote in a note to clients Thursday. “Despite some signs of strain in the U.S. economy, (earnings) expectations remain relatively stable in 2024 and 2025, a sign that we are heading into a historically contentious election.”
Datatrek co-founder Nicholas Colas cited corporate earnings as the reason he remains bullish on the market despite recent volatility.
“The bottom line is that both revenues and profit margins are very healthy at this point, so even if we see a recession in the next 12 months, U.S. companies will remain highly profitable,” Collas said in a note to clients. I’m sure it can be done.” on Thursday.
