Sky-high returns and earnings expectations could mean the end is near for this stock-market bull run
Never since 1950 have the S&P 500’s price and earnings both been so far above the historical trend at one time, one strategist said.
The current stock market bull run, which has seen the S&P 500 surge to record highs, may be due for a correction. According to one strategist, the index's price and earnings are both significantly above their historical trend, a situation that has never occurred since 1950. This divergence could be a warning sign that the market is overvalued and due for a pullback.
Historically, when the S&P 500's price and earnings have become so disconnected from their trend, it has often been followed by a market downturn. This is because high earnings expectations can be difficult to sustain, and any disappointment could lead to a sharp decline in stock prices. Furthermore, with interest rates rising and economic growth showing signs of slowing, investors may become increasingly risk-averse, exacerbating the market's decline.
As investors, it's essential to keep a close eye on the market's fundamentals and be prepared for a potential correction. To watch next: earnings reports from major companies, which could provide insight into whether the market's high expectations are sustainable. Additionally, keep an eye on economic indicators, such as GDP growth and inflation data, which could influence the market's trajectory. A shift in investor sentiment or a change in market leadership could also signal a turning point in the bull run.
Originally reported by marketwatch.com. Expo-News adds analysis for finance & markets readers.