Earnings Drive US Stocks Toward New All-Time Highs
A Goldman Sachs partner, John Flood, believes that strong corporate earnings will drive US stocks to new all-time highs this year. He attributes this prediction to the 'cleaner' positioning environment in the market, which is characterized by decreased leverage among hedge funds and retail investors.
The S&P 500 index saw a 45% year-over-year growth rate in earnings per share (EPS) in the second quarter, exceeding the initial expectation of 22%. Even excluding non-recurring items such as 'other income' from Alphabet and Amazon, the EPS growth rate still reached 26%, marking the fastest pace since 2021.
Flood notes that this upward revision trend is an important foundation supporting market valuations. He also points out that US stock valuations are relatively low compared to other major markets.