Earnings growth overrides geopolitical market shocks
Kevin Muir argued that rising S&P 500 earnings forecasts are driving the market rally, rendering geopolitical shocks temporary noise.
The argument
Despite initial panic over war and oil spikes, the S&P 500 rebounded quickly because next-twelve-month earnings expectations continued to rise while the forward P/E compressed to a historically supportive 19x.
The thesis, stress-tested
✓ What validates it
- ✓S&P 500 forward earnings estimates continue to trend upward
- ✓Forward P/E ratio stabilizing or expanding from the 19x level
▸ Risks discussed
- ▸A downward revision in next-twelve-month S&P 500 earnings forecasts
- ▸Systematic deleveraging or options market-maker short gamma squeezes
Hear it yourself
"Probably the anticipation of some sort of resolution slash taco, whatever you wanna call it. That's probably part of it too. But, also, I think and this kinda gets I'll read this Warren Pies to you because I thought it was really good. He just had it, yesterday. He said, August Brent up 20% in ten days and equity is still resilient. Tells you two things. One, deescalation without a reopening is losing its power to cap oil, physical market biting. And two, equities are seeing something pretty bullish on the quote other side of this. And and"
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