Investment strategist Julie Biel is feeling OMO, or “OK missing out,” when it comes to this year’s stock market rally. With concerns about high valuations and narrow market gains, Biel is cautious about taking big risks in the current market environment.
Stocks had a rough week, with the S&P 500 dropping about 1% and the Dow Jones Industrial Average down nearly 2% following a consumer inflation report that exceeded expectations. Despite the recent pullback, valuations remain stretched, with the S&P 500 trading at more than 21 times 2024 earnings estimates.
Biel emphasizes the importance of strong earnings growth to support current market valuations. With first-quarter earnings reports rolling in, investors are closely watching for signs of growth. Several big financial companies, including Wells Fargo, Citigroup, and JPMorgan Chase, have already reported mixed results.
Looking ahead, analysts are expecting modest profit growth of just 3.6% for S&P 500 companies in the first quarter, driven largely by the tech and healthcare sectors. However, concerns remain about the broader earnings outlook for the year, particularly as inflationary pressures persist.
As companies navigate the challenging economic landscape, investors are hoping for strong earnings to support stock prices. With rate cut hopes fading and inflationary pressures mounting, the focus is on whether companies can sustain earnings growth in the face of these challenges.
Overall, the market is at a critical juncture, with the need for strong earnings growth to offset concerns about inflation and a less-dovish Federal Reserve. As the year progresses, investors will be closely watching corporate earnings reports for signs of resilience and growth in the face of economic headwinds.
