Latest news with #NicholasColas
Yahoo
3 days ago
- Business
- Yahoo
The S&P 500 just hit a new record — why it could keep surging
The S&P 500 (^GSPC) just hit its first record close since early February, which means a familiar talking point is also back in the market discussion. The S&P 500's valuation is back above both the five- and 10-year averages. This is often used as a way to describe stocks as "expensive." But as we've pointed out in the past, just because valuations are high doesn't mean they can't stay high for an extended period of time. It also doesn't mean they can't keep moving higher. The chart below from Exhibit A co-founder Matt Cerminaro shows that when splitting the S&P 500 into deciles organized by least and most expensive, the current market is far less expensive than the peak of the 2021 stock boom. For instance, the average stock in the most expensive bucket is trading at a 63 times forward 12-month price-to-earnings ratio, well below the 104 times forward earnings seen back in 2021. "Price earnings multiples are a function of investor confidence, which is a constantly moving target and has very little in the way of natural limits on either the upside or downside," DataTrek co-founder Nicholas Colas wrote in a note to clients on Wednesday. The S&P 500's most recent record close comes as the market has rallied more than 23% from its April 8 bottom. Now, strategists believe the market's largest tariff fears are behind investors. Economic forecasts have once again begun reverting higher, along with projections for corporate earnings this year. And Wall Street strategists are becoming incrementally bullish on the outlook from here. No fewer than 11 Wall Street firms lowered their S&P 500 targets amid the market sell-off in April. At least eight of those have since raised their bets on where the index will end 2025. The latest was BMO Capital Markets chief investment strategist Brian Belski, who raised his year-end target to 6,700 from 6,100 on Tuesday. "The signposts we called out in April are largely in place – markets are transitioning TO 'show me' FROM 'scare me,"' Belski wrote. "We believe performance is broadening, reactions from daily rhetoric are calming, and actual corporate guidance will increase coming out of the 2Q earnings reporting period." Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Yahoo
4 days ago
- Business
- Yahoo
The S&P 500 just hit a new record — why it could keep surging
The S&P 500 (^GSPC) just hit its first record close since early February, which means a familiar talking point is also back in the market discussion. The S&P 500's valuation is back above both the five- and 10-year averages. This is often used as a way to describe stocks as "expensive." But as we've pointed out in the past, just because valuations are high doesn't mean they can't stay high for an extended period of time. It also doesn't mean they can't keep moving higher. The chart below from Exhibit A co-founder Matt Cerminaro shows that when splitting the S&P 500 into deciles organized by least and most expensive, the current market is far less expensive than the peak of the 2021 stock boom. For instance, the average stock in the most expensive bucket is trading at a 63 times forward 12-month price-to-earnings ratio, well below the 104 times forward earnings seen back in 2021. "Price earnings multiples are a function of investor confidence, which is a constantly moving target and has very little in the way of natural limits on either the upside or downside," DataTrek co-founder Nicholas Colas wrote in a note to clients on Wednesday. The S&P 500's most recent record close comes as the market has rallied more than 23% from its April 8 bottom. Now, strategists believe the market's largest tariff fears are behind investors. Economic forecasts have once again begun reverting higher, along with projections for corporate earnings this year. And Wall Street strategists are becoming incrementally bullish on the outlook from here. No fewer than 11 Wall Street firms lowered their S&P 500 targets amid the market sell-off in April. At least eight of those have since raised their bets on where the index will end 2025. The latest was BMO Capital Markets chief investment strategist Brian Belski, who raised his year-end target to 6,700 from 6,100 on Tuesday. "The signposts we called out in April are largely in place – markets are transitioning TO 'show me' FROM 'scare me,"' Belski wrote. "We believe performance is broadening, reactions from daily rhetoric are calming, and actual corporate guidance will increase coming out of the 2Q earnings reporting period." Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Yahoo
6 days ago
- Business
- Yahoo
Tech optimism is reaching 1999 levels — but with a few key differences: Morning Brief
Tech's back at it. It wasn't that long ago that fears of a Chinese startup's AI advancements channeled a mix of anxieties about overblown tech stocks. Along with a trade war. Several storylines — from reckless AI spending to sky-high valuations — folded neatly into an argument that maybe this was the one step back after the two steps forward over the past couple of years. But after a bout of plunging stock prices, Big Tech has mounted a comeback and then some. The off-the-charts excitement now that a suite of catalysts — trade war, Iran/Israel, and Fed cut hopes — have been put to the side is palpable. By subscribing, you are agreeing to Yahoo's Terms and Privacy Policy Right now, as DataTrek's Nicholas Colas put it, "a bullish call on US large caps therefore requires believing that we can get to 1999-type valuations." It's a charged date to throw into the mix, invoking the exuberance that led up to the dot-com bubble. But as Colas noted, there are key differences for investors to consider even if stocks are partying like it's 1999. At the peak of the internet bubble, the benchmark S&P 500 (^GSPC) traded at more than 24 times forward year earnings estimates. As Colas noted, the index currently trades at 23 times this year's numbers and 20.3 times next year's consensus estimate. To see the bullish calls like the 10% gain from current levels we just got from BMO's Brian Belski, the multiple, depending on exactly how quarterly results go, could surpass that level. (Belski's model has a 24.4x ratio.) That comparison may feel scary and bubbly, but there are a lot of reasons to be an optimist these days, despite the swirling negative catalysts and the lingering sense that trouble is around the corner. As Fed Chair Jerome Powell said last week, the "US economy has defied all kinds of forecasts for it to weaken." Of course, plenty of bets won't pan out. Some estimates say that a huge portion of AI projects will vanish in a few years, and it'd be normal for emerging tech to have winners and losers. And as for the winners, well, you already know their names. They're powering the S&P 500. Colas noted that this year has a much more positive setup than 1999, with rate cuts on the horizon and greater S&P tech exposure. The historic frames are different. So are the underlying technologies driving growth and producing actual profits, and reasons more will follow. But the bullish sentiment feels familiar. That's what makes tech's latest surge so thrilling and disconcerting after the spring we've just had. As tech stocks grasp for new highs, it's difficult to tell if this is the precipice of a pullback or the staging for the next leg upward. The stock prices, however, leave the market's view on it pretty clear. Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
6 days ago
- Business
- Yahoo
Tech optimism is reaching 1999 levels — but with a few key differences: Morning Brief
Tech's back at it. It wasn't that long ago that fears of a Chinese startup's AI advancements channeled a mix of anxieties about overblown tech stocks. Along with a trade war. Several storylines — from reckless AI spending to sky-high valuations — folded neatly into an argument that maybe this was the one step back after the two steps forward over the past couple of years. But after a bout of plunging stock prices, Big Tech has mounted a comeback and then some. The off-the-charts excitement now that a suite of catalysts — trade war, Iran/Israel, and Fed cut hopes — have been put to the side is palpable. By subscribing, you are agreeing to Yahoo's Terms and Privacy Policy Right now, as DataTrek's Nicholas Colas put it, "a bullish call on US large caps therefore requires believing that we can get to 1999-type valuations." It's a charged date to throw into the mix, invoking the exuberance that led up to the dot-com bubble. But as Colas noted, there are key differences for investors to consider even if stocks are partying like it's 1999. At the peak of the internet bubble, the benchmark S&P 500 (^GSPC) traded at more than 24 times forward year earnings estimates. As Colas noted, the index currently trades at 23 times this year's numbers and 20.3 times next year's consensus estimate. To see the bullish calls like the 10% gain from current levels we just got from BMO's Brian Belski, the multiple, depending on exactly how quarterly results go, could surpass that level. (Belski's model has a 24.4x ratio.) That comparison may feel scary and bubbly, but there are a lot of reasons to be an optimist these days, despite the swirling negative catalysts and the lingering sense that trouble is around the corner. As Fed Chair Jerome Powell said last week, the "US economy has defied all kinds of forecasts for it to weaken." Of course, plenty of bets won't pan out. Some estimates say that a huge portion of AI projects will vanish in a few years, and it'd be normal for emerging tech to have winners and losers. And as for the winners, well, you already know their names. They're powering the S&P 500. Colas noted that this year has a much more positive setup than 1999, with rate cuts on the horizon and greater S&P tech exposure. The historic frames are different. So are the underlying technologies driving growth and producing actual profits, and reasons more will follow. But the bullish sentiment feels familiar. That's what makes tech's latest surge so thrilling and disconcerting after the spring we've just had. As tech stocks grasp for new highs, it's difficult to tell if this is the precipice of a pullback or the staging for the next leg upward. The stock prices, however, leave the market's view on it pretty clear. Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.
Yahoo
23-06-2025
- Business
- Yahoo
'Challenging for investors': What Wall Street strategists are saying about the US strikes on Iran
Wall Street is closely watching escalating tensions in the Middle East after President Trump confirmed that the US launched a surprise strike on Iran's nuclear sites late Saturday, marking the country's official entry into the two-week-old conflict. "The strikes were a spectacular military success," Trump said in an address at the White House Saturday evening. "Iran's key nuclear enrichment facilities have been completely and totally obliterated." The president, who referred to Iran as the "bully of the Middle East," said the country "must now make peace." He added, "If they do not, future attacks would be far greater and a lot easier." Markets have held mostly steady in the aftermath of the escalation, although US stock futures fell in the lead-up to Monday's market open. Additionally, bitcoin (BTC-USD) prices, often viewed as a barometer of risk appetite, dropped over 1% to trade around $101,000 a coin. WTI crude (CL=F) and Brent (BZ=F) futures initially jumped when futures trading began on Sunday, but pared gains to trade near $74.50 and $77.50 a barrel, respectively, shortly before the opening bell. Until now, most strategists have said markets largely dismissed the risk of a prolonged conflict, with investors still weighing the potential for unintended consequences following US intervention. Nicholas Colas, co-founder of DataTrek Research, said in a research note Monday that markets are likely to discount downside scenarios and could even resume their rally despite continued negative headlines. "The disconnect between human nature's focus on the present and markets' forward-looking gaze is an under-appreciated reason why volatility of the sort we will see this week is so challenging for investors," he said. But with direct US military engagement now underway, markets may be forced to reprice risk, especially if oil prices continue to rise, threatening to reverse recent disinflation trends and further strain consumers already grappling with elevated costs. "It has been and remains our belief that the longer and broader the conflict becomes, the more challenging it could be for US equities," Lori Calvasina, head of US equity strategy research at RBC Capital Markets, wrote in a Sunday evening note to clients. "These escalations come at a tricky time for US equities, as the S&P 500 has looked fairly valued to us (perhaps a bit overvalued) from a fundamental perspective, with more room to run from a sentiment perspective." The analyst said her three main concerns include: first, the risk that rising national security uncertainty could weigh on equity valuations; second, the possibility that renewed geopolitical tensions could stall the recovery in sentiment that began after the early April tariff lows; and third, the potential for a spike in oil prices, which could fuel inflation concerns. Citi analyst Stuart Kaiser agreed that sharply higher oil prices remain "the channel for geopolitical risks to impact stock markets," identifying crude prices "well above $80 a barrel" as a critical threshold for concern. Kaiser added that options markets are now pricing in a 10% chance that oil surges 20% over the next month, up from just 2.5% two weeks ago, reflecting mounting tail risks as the conflict deepens. Still, Neil Shearing, group chief economist at Oxford Economics, wrote on Monday that oil prices "would need to climb much higher, and stay higher for much longer, to really pose an inflation threat." "Past flare-ups in the region have seen prices fall back quickly, offering some reassurance," he said. "But in a world of radical uncertainty, there's less confidence that history will repeat itself." Wall Street analysts have warned that a prolonged conflict and the potential closure of the Strait of Hormuz could drive oil prices as high as $130 a barrel, pushing US inflation back toward 6%. So far, that risk seems mostly contained, with markets cautiously monitoring developments but not yet pricing in a worst-case scenario. But here's the concern: A sharp rise in energy prices would likely reverse the recent disinflation trend in gas prices. According to the latest May CPI report, prices at the pump have fallen 12% over the past year. The government's energy index declined 1% month over month in the most recent reading. If those trends reverse, economists warn that an inflation rebound could delay interest rate cuts until early 2026 as the Federal Reserve balances its dual mandate of price stability and maximum employment. While the Fed typically focuses on core inflation, which excludes volatile energy prices, higher energy costs could ripple through the supply chain and raise prices across a wide range of goods and services. "You're looking at a potentially more 'stagflationary' scenario out of that," Bank of America senior US economist Stephen Juneau told Yahoo Finance on Monday. "Of course, this has to persist. We're still at a point where oil prices are relatively low compared to a year ago, so we'll just have to see how things unfold from here. I think it's too early to say." Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at Sign in to access your portfolio
