The current price of the US stock market is the highest in almost two years. In the upcoming weeks, Wall Street as corporations report earnings, the market’s valuation may be tested.
The S&P 500 has gained almost 9% year to date after posting its best first-quarter results since 2019. However, the bar may rise for equities to continue gaining at that rate, putting more pressure on businesses to produce impressive outcomes.
According to LSEG Datastream, the benchmark index is trading at 20.7 times its projected earnings for the upcoming 12 months, close to a two-year high of 21.2 reached in late March. In a time when bonds are more appealing due to high Treasurie yields, investors may have less incentive to stick in stocks if earnings growth is unremarkable.
Aside from companies’ opinions on inflation and the economy, investors will also be listening to determine whether the so-called Goldilocks climate of steady growth and declining consumer prices will last.
Expectations on the extent to which the Federal Reserve would lower rates this year have decreased in recent weeks due to indications of persistent inflation. Following another better-than-expected job report on Friday, stocks increased.
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