Stocks have been volatile this week as the yen carry trade unwinds, recession fears grow and volatility soars in the market.
But below the surface, the longer-term outlook for stocks remains strong going into the quarter, fueling a bullish outlook for stocks on some sides of Wall Street. S&P 500 earnings are expected to grow more than 11% in the second quarter, which would be the highest year-over-year earnings growth the index has reported since the fourth quarter of 2021.
That’s part of the reason why Julian Emanuel of Evercore ISI is calling the recent stock sell-off “a buyable correction within a bull market, not the end of the bull market.”
“Over the long term, earnings drive stock prices,” Emanuel wrote in a client note on Thursday.[Earnings] Despite some signs of strain in the U.S. economy, outlooks for 2024 and 2025 remain relatively stable, a good sign heading into a historically competitive election.”
DataTrek co-founder Nicholas Colas cited corporate earnings as a reason he remains bullish on the market despite recent volatility.
“The bottom line is that earnings and margins are both very healthy today, so U.S. companies should be able to maintain high profitability even if we see an economic downturn over the next 12 months,” Colas wrote in a client note on Thursday.