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U.S. inventory market upside seems restricted, and valuations could also be in danger, Crossmark International Investments Chief Funding Officer Bob Doll mentioned Monday, noting that corporations will possible face a problem in assembly earnings expectations for subsequent 12 months.
Equities are up 16% 12 months thus far, totally on price-to-earnings growth, “whereas actual charges and price of capital are shifting deeper into restrictive territory,” Doll famous in his weekly Doll’s Deliberations e-newsletter.
“Historical past suggests this relationship is changing into more and more unsustainable, posing danger to the fairness a number of, particularly since earnings expectations already face a excessive hurdle for 2024,” he mentioned.
The 15 greatest S&P 500 corporations are up 41%, whereas the median firm is up solely 3%, Doll mentioned.
Crossmark stays involved about companies’ capacity to satisfy “outsized” 2024 earnings progress expectations within the subsequent 12 months, the CIO wrote, noting estimates name for 12% progress within the S&P 500. August was the primary month since March 2022 that the three-month common of S&P upward earnings estimate revisions as a share of whole revisions exceeded 50%, he famous.
“Though international company earnings proceed to grind larger, fairness markets stay hostage to the whims of the bond market, leading to a uneven stop-start backdrop,” Doll wrote.
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