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Author: Anthony Pompliano, Founder and CEO of Professional Capital Management; Compiled by: Shaw Bitchain Vision
I spent a lot of time trying to answer the question: “What the hell is wrong with the financial market?” Some people think we are in the midst of a tech-driven economic boom that will last for years, while others think that everything is overvalued and a major market crash is coming.
It was this passionate disagreement that attracted me.The market is ultimately the referee, so it will determine who is the winner, but I’ve been trying to make sure I’m on the right side.
Let’s start with one of the negative views on the market.
“The expected P/E ratio of the S&P 500 is currently at the same level as in January 2021. The current federal funds effective rate is 4.09% … it is only 0.09% in January 2021.”
Kevin Gordon believes this is a major danger warning sign.”The market valuation is basically higher than in 2021. Investors are counting on AI to drive corporate earnings growth at an unprecedented rate. But we haven’t seen that yet, and I don’t think it will happen in the near term. Now we should be more cautious, not greedy.”
“But I don’t know if people should be pessimistic about these numbers as they appear to be.” Kevin Gordon continued: “The expected margins for the S&P 500 have been rising significantly and hitting record highs.”
This is a good sign that profit margins are rising.This reinforces the view that the company’s revenue and profits are growing, but the number of employees is decreasing.
One of the important reasons why we are seeing high investor enthusiasm is artificial intelligence.”Since ChatGPT was launched in November 2022, AI-related stocks have contributed 75% of the S&P 500’s return, 80% of earnings growth and 90% of capital expenditure growth,” wrote Michael Cembalest of JPMorgan’s Chase.
The prosperity of artificial intelligence did not come out of thin air.Ryan Detrick of Carson Group said that when the S&P 500 hit an all-time high in September, the probability of a fourth-quarter rise was more than 90%.
September hit a record high, thanks to continued buying in the market.”The S&P 500 has fallen by no more than 2% for 107 consecutive trading days, setting the longest record in more than a year,” Bloomberg reported.
The backdrop of the continued bullish momentum is that people agree that the probability of a rate cut in October is currently 94%.
Many people will say, “This time it’s different.” They will point out some strange political policies, or criticism of the current government, but these are just noise.
Ryan Detrick said stocks will rise during nearly every president, whether they are Republicans or Democrats.
Don’t let political factors ruin your portfolio.The structure of stocks determines that they will continue to rise for a long time.Perhaps most importantly, consumer enthusiasm is justified in indicating bullish sentiment in the market.
We see real GDP figures in the second quarter increased to 3.8%, much higher than economists’ forecasts of 3.3%.
Therefore, we see consumption expenditures far exceed expectations, revenue increases, and imports decrease.In my opinion, these are positive progress.
After reviewing the economic data, I understand why some people are bearish.But I still think they are wrong.Let’s wait and see.Time will tell everything, and the market will give the final answer.
