In a notable market analysis, investment firm Richard Bernstein Advisors (RBA) has suggested that the stock market is on the cusp of a “once-in-a-generation” buying opportunity, primarily driven by the imminent surge in corporate profits across various market sectors.
According to RBA analysts, corporate profit indicators in both the United States and global stock markets have reached a trough. This signifies that earnings are poised for a substantial upturn across nearly all areas of the market. RBA’s outlook counters concerns of an impending hard landing or recession in the economy, indicating that corporate profits are in the midst of taking off.
Despite a profits recession affecting global stocks earlier this year, RBA has observed that earnings have likely bottomed out, and the firm anticipates a significant acceleration in profits as we progress towards the end of 2023 and into 2024.
Within the United States, leading indicators for corporate profits have also shown signs of stabilizing, pointing towards an increase in earnings momentum in the coming year. RBA predicts that S&P 500 earnings growth could surge by 10% to 15% through 2024.
These promising growth trends are bolstered by a robust economy. In the most recent quarter, GDP expanded by an impressive 8.5% before adjusting for inflation, marking the highest pace of nominal growth since 2006. The impact of this robust economic growth is already evident in corporate earnings, with approximately 130 US companies reporting at least 25% earnings growth as of October, as per RBA’s analysis.
RBA envisions a potential upsurge in profits across nearly every segment of the stock market, with the exception of companies belonging to the “Magnificent Seven.” These firms have witnessed substantial share price gains this year, driven by Wall Street’s enthusiasm for artificial intelligence. However, RBA contends that these megacap tech giants are currently overvalued, making virtually any other investment option an attractive opportunity for investors.
The firm emphasized, “Such narrow leadership seems totally unjustified, and their extreme valuations suggest a once-in-a-generation investment opportunity in virtually anything other than those 7 stocks.”
Despite recent declines in the S&P 500, prompted by surging bond yields and concerns about prolonged high-interest rates in the economy, RBA’s optimistic outlook aligns with other market forecasters who have made bullish cases for stocks through the end of the year. These analyses suggest that equities could quickly rebound from the recent correction.
As corporate profits continue to show signs of resurgence, investors may find themselves at a unique juncture to capitalize on this “once-in-a-generation” buying opportunity in the stock market.
