S&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?

Seekingalpha2023-06-12

After rallying 20% off the lows in October 2022, the S&P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, ...

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Comment（6）

Longmanlee
·2023-06-12
Manage the portfolio wisely... Dont all in
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4
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runningjames
·2023-06-12
Wth this uncertainty in market, short bull maybe but overall it will turn around and bear will continue. Prediction 4360 will be max to goes then dip back to 4200 or even lower
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3
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phongy 45
·2023-06-12
Nice ...
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3
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Musky
·2023-06-12
As u hv correctly said history is a guide. This time is goong to b different. So far the bears have been wrong because they r using the old model to evaluate the current situation which is quite different from the past. One key point that most bears overlook is the strength of employment. US GDP is 2/3 dependent on the consumers. So long as people r gainfully employed, there will b no recession n housing market will not crash albeit business will stay slow in a high rate environment. To conclude, big tech n AI will continue to lead the mkt to new high. Once fed pivot the rest off the mkt will play catch up
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- SG 88:
  interesting
  2023-06-13
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  ok
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Mr Mooney
·2023-06-12
# Interest rate is high # Profit margin are down for future. # Inflatation is higher than limit. # unemployent rate is keep rising slowly # Stock price are keep moving up like rocket. # My assumption is great correction will coming soon. Invest save
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davidsoh
·2023-06-12
I don think is a Bull run ! Is bcos they added Tesla into the s&p !! Becareful guys... Is just a game !!
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The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>S&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nS&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-06-12 08:01 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards><strong>Seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>After rallying 20% off the lows in October 2022, the S&P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":".SPX","symbol_name":"S&P 500 Index","start_time":0,"source_url":"https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards","article_id":"2342547444","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2342547444","pubTimestamp":1686528068,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven't been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called \"kitchen sink\" strategy where companies or political leaders dump all the bad news at once rather than let it trickle out. I'm sure people have fun talking about a tech \"singularity\" on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple?","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{".SPX":"S&P 500 Index",".DJI":"道琼斯",".IXIC":"NASDAQ Composite"},"translate_title":"标普500正式进入牛市：不可阻挡的飙升还是纸牌屋？","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{".DJI":0.9,".IXIC":0.9,".SPX":0.9},"content_text":"After rallying 20% off the lows in October 2022, the S&P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, Microsoft (MSFT) up 36%, Nvidia (NVDA) up 170%, Tesla (TSLA) up 126%, Amazon (AMZN) up 43%, and Google (GOOG) up 37%. These performance figures leave little doubt as to whether this rally counts as a bull market. The problem, of course, is that the bull market is concentrated in only a handful of stocks, and the stocks that are leading it have enormous valuations compared to their underlying earnings. With economic signals flashing warnings signs and valuations stretched, this rally has the hallmarks of a late-stage bull run continued from the easy-money era. Moreover, there are some fundamental signs that the bull run may soon run out of steam.Data by YChartsI'm Not Comfortable With Current Mega-Cap Valuations, And You Shouldn't Be EitherFor example, Apple is up 44% YTD and trades for 30.3x earnings, but most analysts are shockingly revising its earnings estimates downward! Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven't been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called \"kitchen sink\" strategy where companies or political leaders dump all the bad news at once rather than let it trickle out.I'm sure people have fun talking about a tech \"singularity\" on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple? Because it's about 8% of the S&P 500's market cap, while representing a much smaller share of the index's profit. Together, the top 10 holdings in the S&P 500 make up over 30% of the index. Historically this level of concentration of risk is a red flag. Another issue is lack of breadth, which has gotten superficially better with small caps rallying, but largely due to a series of short squeezes in heavily shorted, doomed companies.Microsoft is another interesting valuation story, up 36% for the year and trading for roughly 33.9x earnings. MSFT is actually showing some growth, and its earnings should come in about 4.8% higher than last year. For FY 2024, analysts have revised estimates upwards by a 2-3% over the past few months. However, since the introduction of Chat GPT in late 2022, MSFT earnings estimates are actually lower. Professional analysts who follow Microsoft think the trajectory of their earnings is flat or slightly improved by its AI investments, while retail traders expect the moon on a silver platter. Why might this be?For one, Microsoft paid $10 billion for half of OpenAI (they don't own the whole thing, contrary to what many traders might think).Second, tech companies have been subject to a series of sneaky corporate tax hikes starting in January of this year.Third, interest rates have gone up markedly, meaning that companies will eventually have to replace their dirt-cheap corporate debt from the ZIRP years with expensive debt. Microsoft isn't a big offender with ramping up borrowing, but a lot of Big Tech companies are. MSFT isn't as bad as the others, but 33.9x is a high multiple compared to even some of the more optimistic analysts.Outside of the blue chips and into the second tier of the more aggressive growers, things get dicier. Amazon is roughly breaking even while facing steep increases in interest costs on corporate debt. Additionally, the company bears the full brunt of inflation with a large workforce and massive capital expenditure needs. As such, Amazon is seeing a steady deterioration in earnings estimates. To continue to grow, the company will have to issue new debt at much higher interest rates than they've done so far, further pressuring profitability. Tesla trades for 70x projected earnings, and earnings estimates have been relentlessly revised downward as the company finds itself locked in a price war with competitors across the globe. How is Tesla going to grow earnings when they're forced to cut prices to maintain growth? Tesla could be the second best-selling automaker in the world but the stock could fall 80-90% from here due to competition. With Nvidia, one looks at the valuation and then looks at the financial statements and wonders if they're even connected at all. This small group of stocks, with these middling fundamentals, is driving the entire market. Without them, the index would be flat or down.AI is great, but it's been around for much longer than you think. I worked on a corporate AI project in 2020: using an AI chatbot to help downsize a call center. As early as 2016, companies were pitching AI-generated content to publishers. AI likely will be able to help some companies improve their margins, but the data is clearly showing that its effect on the economy is being outweighed by much larger macro factors like interest rates, taxes, and even the opioid crisis. You should expect incremental productivity improvements from AI, but don't pay 150x earnings to hucksters for them!And if the boldest hype about AI is true, then you probably don't have to worry about losing purchasing power because of it. If tech companies truly decimate their highly paid labor forces, then it will pull a massive amount of demand out of the economy as hundreds of thousands of six-figure tech earners find themselves out of a job, while the shareholders who benefit are likely to simply sit on the money rather than spend it.Analysts Priced A 2023 Recession And A 2024 Earnings BoomFor their part, analysts had expected a mild recession in early 2023, followed by a robust recovery in earnings in late 2023 and 2024. However, despite subtle signs of weakening, the business cycle has yet to fully turn. The Fed had been expected to start cutting interest rates now, and instead, they're not even done hiking. That means that the robust earnings recovery in 2024 coming off the business cycle trough is likely not going to happen. Earnings estimates have perked up in the past few weeks, but the hidden driver there is the recent weakness in the US dollar, which disproportionately helped Big Tech. Should the global economy weaken, this could catch investors offside if the dollar strengthens again, as it typically does in times of global recession.US/International Revenue Breakdown (FactSet)These are the current analyst consensus estimates for 2023 earnings. Note the big recovery expected starting in Q3.2023 S&P 500 Earnings Estimates (FactSet)And these are the consensus estimates for 2024.2024 S&P 500 Earnings Estimates (FactSet)Estimates are coming down. It's normal for future earnings estimates to be overly optimistic, but what it does mean is that stocks are quite expensive. If you take the earnings estimates for 2023 at face value, then stocks are trading for roughly 19.5x earnings. If you're more skeptical about how these earnings tend to be revised down, then stocks are trading for 22x earnings or more.S&P 500 Earnings Estimates vs. Actuals (Yardeni Research)These valuations all are priced against the most important number in finance, which is the rate on cash. Cash currently pays about 5.2%, which means that you officially can get more return by parking your money in cash than you can by investing in the premier businesses in America. However, after 10+ years of no alternative to stocks, investors now have a clear alternative in cash. Additionally, should stocks fall sharply in the future, you can switch back into stocks at a moment's notice and buy from panicked/distressed sellers. With the Fed hiking more, your return from cash is not only the 5.5% or more that you'll earn but also the optionality you gain by getting what's essentially a free option to buy stocks after a correction/crash.Why Stocks Often Rally When The Economy Starts To WeakenHistorically, it's actually typical for stocks to surge as the yield curve inverts. This is because investors tend to be shortsighted and think that Fed pivots are the key to profit. However, this tends to end poorly, as yield curve inversions tend to foretell economic pain ahead. Bond investors see the pain in the economy coming 12+ months out, while stock bulls tend to react far more to changes in sentiment and current news.Stock Returns After Inverted Yield Curve (Leuthold via Bloomberg)This data shows that on average, stocks tend to rally anywhere 13% on average in the 6 months after the yield curve fully inverts. However, the final low isn't reached until over a year later on average.If this rally plays out like historical rallies facing shaky economic fundamentals and a deeply inverted yield curve, stocks might fall 35% from here to 2800, finally bottoming sometime in 2024. Due to how high valuations are currently and how constrained fiscal policy is by high debt levels, this may be conservative. Economic expansions tend to be associated with quiet changes. Similarly, unemployment rises like a rocket but falls like a feather.Data by YChartsBottom LineStocks crossed the threshold for a bull market, but it doesn't change the reality on the ground. The Fed is likely to keep hiking interest rates to balance the economy, and corporate profits should continue to slowly fall. Markets have an amazing capacity to do crazy things, but there's only so far that things can stretch. Far from being an unstoppable surge driven by fundamentals, this year's bull market looks increasingly driven by speculation, not by underlying corporate fundamentals. If they believe the business cycle has been legislated out of existence then investors can pile in here all they want. However, if history is any guide, they're likely to be disappointed with their results.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":186398898593800,"gmtCreate":1686546817410,"gmtModify":1686546823263,"author":{"id":"3577490230864593","authorId":"3577490230864593","name":"Longmanlee","avatar":"https://static.tigerbbs.com/666e2e5ae6ccc9d73e7d020e8b497df5","vip":1,"hat":"https://static.tigerbbs.com/50a4c8d97279fa9f8f1fa9749a6bdff4","crmLevel":2,"crmLevelSwitch":1,"authorIdStr":"3577490230864593","idStr":"3577490230864593"},"htmlText":"Manage the portfolio wisely... Dont all in","listText":"Manage the portfolio wisely... Dont all in","text":"Manage the portfolio wisely... Dont all in","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":4,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/186398898593800","repostId":2342547444,"repostType":4,"repost":{"id":"2342547444","pubTimestamp":1686528068,"share":"https://ttm.financial/m/news/2342547444?lang=&edition=fundamental","pubTime":"2023-06-12 08:01","market":"us","language":"en","title":"S&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?","url":"https://stock-news.laohu8.com/highlight/detail?id=2342547444","media":"Seekingalpha","summary":"Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven't been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called \"kitchen sink\" strategy where companies or political leaders dump all the bad news at once rather than let it trickle out. I'm sure people have fun talking about a tech \"singularity\" on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple?","content":"<html><head></head><body><p>After rallying 20% off the lows in October 2022, the S&amp;P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, Microsoft (MSFT) up 36%, Nvidia (NVDA) up 170%, Tesla (TSLA) up 126%, Amazon (AMZN) up 43%, and Google (GOOG) up 37%. These performance figures leave little doubt as to whether this rally counts as a bull market. The problem, of course, is that the bull market is concentrated in only a handful of stocks, and the stocks that are leading it have enormous valuations compared to their underlying earnings. With economic signals flashing warnings signs and valuations stretched, this rally has the hallmarks of a late-stage bull run continued from the easy-money era. Moreover, there are some fundamental signs that the bull run may soon run out of steam.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/8c471faae90db5f03960471ca6067337\" tg-width=\"635\" tg-height=\"417\"/></p><p>Data by YCharts</p><h2>I&#39;m Not Comfortable With Current Mega-Cap Valuations, And You Shouldn&#39;t Be Either</h2><p>For example, Apple is up 44% YTD and trades for 30.3x earnings, but most analysts are shockingly revising its earnings estimates downward! Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven&#39;t been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called &#34;kitchen sink&#34; strategy where companies or political leaders dump all the bad news at once rather than let it trickle out.</p><p>I&#39;m sure people have fun talking about a tech &#34;singularity&#34; on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple? Because it&#39;s about 8% of the S&amp;P 500&#39;s market cap, while representing a much smaller share of the index&#39;s profit. Together, the top 10 holdings in the S&amp;P 500 make up over 30% of the index. Historically this level of concentration of risk is a red flag. Another issue is lack of breadth, which has gotten superficially better with small caps rallying, but largely due to a series of short squeezes in heavily shorted, doomed companies.</p><p>Microsoft is another interesting valuation story, up 36% for the year and trading for roughly 33.9x earnings. MSFT is actually showing some growth, and its earnings should come in about 4.8% higher than last year. For FY 2024, analysts have revised estimates upwards by a 2-3% over the past few months. However, since the introduction of Chat GPT in late 2022, MSFT earnings estimates are actually lower. Professional analysts who follow Microsoft think the trajectory of their earnings is flat or slightly improved by its AI investments, while retail traders expect the moon on a silver platter. Why might this be?</p><ul><li><p>For one, Microsoft paid $10 billion for half of OpenAI (they don&#39;t own the whole thing, contrary to what many traders might think).</p></li><li><p>Second, tech companies have been subject to a series of sneaky corporate tax hikes starting in January of this year.</p></li><li><p>Third, interest rates have gone up markedly, meaning that companies will eventually have to replace their dirt-cheap corporate debt from the ZIRP years with expensive debt. Microsoft isn&#39;t a big offender with ramping up borrowing, but a lot of Big Tech companies are. MSFT isn&#39;t as bad as the others, but 33.9x is a high multiple compared to even some of the more optimistic analysts.</p></li></ul><p>Outside of the blue chips and into the second tier of the more aggressive growers, things get dicier. Amazon is roughly breaking even while facing steep increases in interest costs on corporate debt. Additionally, the company bears the full brunt of inflation with a large workforce and massive capital expenditure needs. As such, Amazon is seeing a steady deterioration in earnings estimates. To continue to grow, the company will have to issue new debt at much higher interest rates than they&#39;ve done so far, further pressuring profitability. Tesla trades for 70x projected earnings, and earnings estimates have been relentlessly revised downward as the company finds itself locked in a price war with competitors across the globe. How is Tesla going to grow earnings when they&#39;re forced to cut prices to maintain growth? Tesla could be the second best-selling automaker in the world but the stock could fall 80-90% from here due to competition. With Nvidia, one looks at the valuation and then looks at the financial statements and wonders if they&#39;re even connected at all. This small group of stocks, with these middling fundamentals, is driving the entire market. Without them, the index would be flat or down.</p><p>AI is great, but it&#39;s been around for much longer than you think. I worked on a corporate AI project in 2020: using an AI chatbot to help downsize a call center. As early as 2016, companies were pitching AI-generated content to publishers. AI likely will be able to help some companies improve their margins, but the data is clearly showing that its effect on the economy is being outweighed by much larger macro factors like interest rates, taxes, and even the opioid crisis. You should expect incremental productivity improvements from AI, but don&#39;t pay 150x earnings to hucksters for them!</p><p>And if the boldest hype about AI is true, then you probably don&#39;t have to worry about losing purchasing power because of it. If tech companies truly decimate their highly paid labor forces, then it will pull a massive amount of demand out of the economy as hundreds of thousands of six-figure tech earners find themselves out of a job, while the shareholders who benefit are likely to simply sit on the money rather than spend it.</p><h2>Analysts Priced A 2023 Recession And A 2024 Earnings Boom</h2><p>For their part, analysts had expected a mild recession in early 2023, followed by a robust recovery in earnings in late 2023 and 2024. However, despite subtle signs of weakening, the business cycle has yet to fully turn. The Fed had been expected to start cutting interest rates now, and instead, they&#39;re not even done hiking. That means that the robust earnings recovery in 2024 coming off the business cycle trough is likely not going to happen. Earnings estimates have perked up in the past few weeks, but the hidden driver there is the recent weakness in the US dollar, which disproportionately helped Big Tech. Should the global economy weaken, this could catch investors offside if the dollar strengthens again, as it typically does in times of global recession.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/0091af902f7808c1f95a3e50679b3d5f\" tg-width=\"640\" tg-height=\"366\"/></p><p>US/International Revenue Breakdown (FactSet)</p><p>These are the current analyst consensus estimates for 2023 earnings. Note the big recovery expected starting in Q3.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/af806efe3f161e89b097c836d2d98093\" tg-width=\"640\" tg-height=\"372\"/></p><p>2023 S&amp;P 500 Earnings Estimates (FactSet)</p><p>And these are the consensus estimates for 2024.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/6376dfff185d27c6f82b84f619370556\" tg-width=\"640\" tg-height=\"361\"/></p><p>2024 S&amp;P 500 Earnings Estimates (FactSet)</p><p>Estimates are coming down. It&#39;s normal for future earnings estimates to be overly optimistic, but what it does mean is that stocks are quite expensive. If you take the earnings estimates for 2023 at face value, then stocks are trading for roughly 19.5x earnings. If you&#39;re more skeptical about how these earnings tend to be revised down, then stocks are trading for 22x earnings or more.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/0f786fb4efe9cfe6e16084b185d35c20\" tg-width=\"640\" tg-height=\"338\"/></p><p>S&amp;P 500 Earnings Estimates vs. Actuals (Yardeni Research)</p><p>These valuations all are priced against the most important number in finance, which is the rate on cash. Cash currently pays about 5.2%, which means that you officially can get more return by parking your money in cash than you can by investing in the premier businesses in America. However, after 10+ years of no alternative to stocks, investors now have a clear alternative in cash. Additionally, should stocks fall sharply in the future, you can switch back into stocks at a moment&#39;s notice and buy from panicked/distressed sellers. With the Fed hiking more, your return from cash is not only the 5.5% or more that you&#39;ll earn but also the optionality you gain by getting what&#39;s essentially a free option to buy stocks after a correction/crash.</p><h2>Why Stocks Often Rally When The Economy Starts To Weaken</h2><p>Historically, it&#39;s actually typical for stocks to surge as the yield curve inverts. This is because investors tend to be shortsighted and think that Fed pivots are the key to profit. However, this tends to end poorly, as yield curve inversions tend to foretell economic pain ahead. Bond investors see the pain in the economy coming 12+ months out, while stock bulls tend to react far more to changes in sentiment and current news.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/06fdffa99bde7cefca7d7f2edcb37a27\" tg-width=\"640\" tg-height=\"279\"/></p><p>Stock Returns After Inverted Yield Curve (Leuthold via Bloomberg)</p><p>This data shows that on average, stocks tend to rally anywhere 13% on average in the 6 months after the yield curve fully inverts. However, the final low isn&#39;t reached until over a year later on average.</p><p>If this rally plays out like historical rallies facing shaky economic fundamentals and a deeply inverted yield curve, stocks might fall 35% from here to 2800, finally bottoming sometime in 2024. Due to how high valuations are currently and how constrained fiscal policy is by high debt levels, this may be conservative. Economic expansions tend to be associated with quiet changes. Similarly, unemployment rises like a rocket but falls like a feather.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/ab6e6077def6ddeb2a82df24e65bc6a1\" tg-width=\"635\" tg-height=\"417\"/></p><p>Data by YCharts</p><h2>Bottom Line</h2><p>Stocks crossed the threshold for a bull market, but it doesn&#39;t change the reality on the ground. The Fed is likely to keep hiking interest rates to balance the economy, and corporate profits should continue to slowly fall. Markets have an amazing capacity to do crazy things, but there&#39;s only so far that things can stretch. Far from being an unstoppable surge driven by fundamentals, this year&#39;s bull market looks increasingly driven by speculation, not by underlying corporate fundamentals. If they believe the business cycle has been legislated out of existence then investors can pile in here all they want. However, if history is any guide, they&#39;re likely to be disappointed with their results.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>S&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nS&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-06-12 08:01 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards><strong>Seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>After rallying 20% off the lows in October 2022, the S&P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{".SPX":"S&P 500 Index",".IXIC":"NASDAQ Composite",".DJI":"道琼斯"},"source_url":"https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2342547444","content_text":"After rallying 20% off the lows in October 2022, the S&P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, Microsoft (MSFT) up 36%, Nvidia (NVDA) up 170%, Tesla (TSLA) up 126%, Amazon (AMZN) up 43%, and Google (GOOG) up 37%. These performance figures leave little doubt as to whether this rally counts as a bull market. The problem, of course, is that the bull market is concentrated in only a handful of stocks, and the stocks that are leading it have enormous valuations compared to their underlying earnings. With economic signals flashing warnings signs and valuations stretched, this rally has the hallmarks of a late-stage bull run continued from the easy-money era. Moreover, there are some fundamental signs that the bull run may soon run out of steam.Data by YChartsI'm Not Comfortable With Current Mega-Cap Valuations, And You Shouldn't Be EitherFor example, Apple is up 44% YTD and trades for 30.3x earnings, but most analysts are shockingly revising its earnings estimates downward! Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven't been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called \"kitchen sink\" strategy where companies or political leaders dump all the bad news at once rather than let it trickle out.I'm sure people have fun talking about a tech \"singularity\" on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple? Because it's about 8% of the S&P 500's market cap, while representing a much smaller share of the index's profit. Together, the top 10 holdings in the S&P 500 make up over 30% of the index. Historically this level of concentration of risk is a red flag. Another issue is lack of breadth, which has gotten superficially better with small caps rallying, but largely due to a series of short squeezes in heavily shorted, doomed companies.Microsoft is another interesting valuation story, up 36% for the year and trading for roughly 33.9x earnings. MSFT is actually showing some growth, and its earnings should come in about 4.8% higher than last year. For FY 2024, analysts have revised estimates upwards by a 2-3% over the past few months. However, since the introduction of Chat GPT in late 2022, MSFT earnings estimates are actually lower. Professional analysts who follow Microsoft think the trajectory of their earnings is flat or slightly improved by its AI investments, while retail traders expect the moon on a silver platter. Why might this be?For one, Microsoft paid $10 billion for half of OpenAI (they don't own the whole thing, contrary to what many traders might think).Second, tech companies have been subject to a series of sneaky corporate tax hikes starting in January of this year.Third, interest rates have gone up markedly, meaning that companies will eventually have to replace their dirt-cheap corporate debt from the ZIRP years with expensive debt. Microsoft isn't a big offender with ramping up borrowing, but a lot of Big Tech companies are. MSFT isn't as bad as the others, but 33.9x is a high multiple compared to even some of the more optimistic analysts.Outside of the blue chips and into the second tier of the more aggressive growers, things get dicier. Amazon is roughly breaking even while facing steep increases in interest costs on corporate debt. Additionally, the company bears the full brunt of inflation with a large workforce and massive capital expenditure needs. As such, Amazon is seeing a steady deterioration in earnings estimates. To continue to grow, the company will have to issue new debt at much higher interest rates than they've done so far, further pressuring profitability. Tesla trades for 70x projected earnings, and earnings estimates have been relentlessly revised downward as the company finds itself locked in a price war with competitors across the globe. How is Tesla going to grow earnings when they're forced to cut prices to maintain growth? Tesla could be the second best-selling automaker in the world but the stock could fall 80-90% from here due to competition. With Nvidia, one looks at the valuation and then looks at the financial statements and wonders if they're even connected at all. This small group of stocks, with these middling fundamentals, is driving the entire market. Without them, the index would be flat or down.AI is great, but it's been around for much longer than you think. I worked on a corporate AI project in 2020: using an AI chatbot to help downsize a call center. As early as 2016, companies were pitching AI-generated content to publishers. AI likely will be able to help some companies improve their margins, but the data is clearly showing that its effect on the economy is being outweighed by much larger macro factors like interest rates, taxes, and even the opioid crisis. You should expect incremental productivity improvements from AI, but don't pay 150x earnings to hucksters for them!And if the boldest hype about AI is true, then you probably don't have to worry about losing purchasing power because of it. If tech companies truly decimate their highly paid labor forces, then it will pull a massive amount of demand out of the economy as hundreds of thousands of six-figure tech earners find themselves out of a job, while the shareholders who benefit are likely to simply sit on the money rather than spend it.Analysts Priced A 2023 Recession And A 2024 Earnings BoomFor their part, analysts had expected a mild recession in early 2023, followed by a robust recovery in earnings in late 2023 and 2024. However, despite subtle signs of weakening, the business cycle has yet to fully turn. The Fed had been expected to start cutting interest rates now, and instead, they're not even done hiking. That means that the robust earnings recovery in 2024 coming off the business cycle trough is likely not going to happen. Earnings estimates have perked up in the past few weeks, but the hidden driver there is the recent weakness in the US dollar, which disproportionately helped Big Tech. Should the global economy weaken, this could catch investors offside if the dollar strengthens again, as it typically does in times of global recession.US/International Revenue Breakdown (FactSet)These are the current analyst consensus estimates for 2023 earnings. Note the big recovery expected starting in Q3.2023 S&P 500 Earnings Estimates (FactSet)And these are the consensus estimates for 2024.2024 S&P 500 Earnings Estimates (FactSet)Estimates are coming down. It's normal for future earnings estimates to be overly optimistic, but what it does mean is that stocks are quite expensive. If you take the earnings estimates for 2023 at face value, then stocks are trading for roughly 19.5x earnings. If you're more skeptical about how these earnings tend to be revised down, then stocks are trading for 22x earnings or more.S&P 500 Earnings Estimates vs. Actuals (Yardeni Research)These valuations all are priced against the most important number in finance, which is the rate on cash. Cash currently pays about 5.2%, which means that you officially can get more return by parking your money in cash than you can by investing in the premier businesses in America. However, after 10+ years of no alternative to stocks, investors now have a clear alternative in cash. Additionally, should stocks fall sharply in the future, you can switch back into stocks at a moment's notice and buy from panicked/distressed sellers. With the Fed hiking more, your return from cash is not only the 5.5% or more that you'll earn but also the optionality you gain by getting what's essentially a free option to buy stocks after a correction/crash.Why Stocks Often Rally When The Economy Starts To WeakenHistorically, it's actually typical for stocks to surge as the yield curve inverts. This is because investors tend to be shortsighted and think that Fed pivots are the key to profit. However, this tends to end poorly, as yield curve inversions tend to foretell economic pain ahead. Bond investors see the pain in the economy coming 12+ months out, while stock bulls tend to react far more to changes in sentiment and current news.Stock Returns After Inverted Yield Curve (Leuthold via Bloomberg)This data shows that on average, stocks tend to rally anywhere 13% on average in the 6 months after the yield curve fully inverts. However, the final low isn't reached until over a year later on average.If this rally plays out like historical rallies facing shaky economic fundamentals and a deeply inverted yield curve, stocks might fall 35% from here to 2800, finally bottoming sometime in 2024. Due to how high valuations are currently and how constrained fiscal policy is by high debt levels, this may be conservative. Economic expansions tend to be associated with quiet changes. Similarly, unemployment rises like a rocket but falls like a feather.Data by YChartsBottom LineStocks crossed the threshold for a bull market, but it doesn't change the reality on the ground. The Fed is likely to keep hiking interest rates to balance the economy, and corporate profits should continue to slowly fall. Markets have an amazing capacity to do crazy things, but there's only so far that things can stretch. Far from being an unstoppable surge driven by fundamentals, this year's bull market looks increasingly driven by speculation, not by underlying corporate fundamentals. If they believe the business cycle has been legislated out of existence then investors can pile in here all they want. However, if history is any guide, they're likely to be disappointed with their results.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":186393307189352,"gmtCreate":1686545458320,"gmtModify":1686545462699,"author":{"id":"4117336023184202","authorId":"4117336023184202","name":"runningjames","avatar":"https://community-static.tradeup.com/news/3467c93ce8ec8c583f28f405e68f0c00","vip":1,"hat":"https://static.tigerbbs.com/b0a2963eb37c60c5d6d4a8dbcd266952","crmLevel":2,"crmLevelSwitch":1,"authorIdStr":"4117336023184202","idStr":"4117336023184202"},"htmlText":"Wth this uncertainty in market, short bull maybe but overall it will turn around and bear will continue. Prediction&nbsp;4360 will be max to goes then dip back to 4200 or even lower","listText":"Wth this uncertainty in market, short bull maybe but overall it will turn around and bear will continue. Prediction&nbsp;4360 will be max to goes then dip back to 4200 or even lower","text":"Wth this uncertainty in market, short bull maybe but overall it will turn around and bear will continue. Prediction 4360 will be max to goes then dip back to 4200 or even lower","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/186393307189352","repostId":2342547444,"repostType":4,"repost":{"id":"2342547444","pubTimestamp":1686528068,"share":"https://ttm.financial/m/news/2342547444?lang=&edition=fundamental","pubTime":"2023-06-12 08:01","market":"us","language":"en","title":"S&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?","url":"https://stock-news.laohu8.com/highlight/detail?id=2342547444","media":"Seekingalpha","summary":"Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven't been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called \"kitchen sink\" strategy where companies or political leaders dump all the bad news at once rather than let it trickle out. I'm sure people have fun talking about a tech \"singularity\" on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple?","content":"<html><head></head><body><p>After rallying 20% off the lows in October 2022, the S&amp;P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, Microsoft (MSFT) up 36%, Nvidia (NVDA) up 170%, Tesla (TSLA) up 126%, Amazon (AMZN) up 43%, and Google (GOOG) up 37%. These performance figures leave little doubt as to whether this rally counts as a bull market. The problem, of course, is that the bull market is concentrated in only a handful of stocks, and the stocks that are leading it have enormous valuations compared to their underlying earnings. With economic signals flashing warnings signs and valuations stretched, this rally has the hallmarks of a late-stage bull run continued from the easy-money era. Moreover, there are some fundamental signs that the bull run may soon run out of steam.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/8c471faae90db5f03960471ca6067337\" tg-width=\"635\" tg-height=\"417\"/></p><p>Data by YCharts</p><h2>I&#39;m Not Comfortable With Current Mega-Cap Valuations, And You Shouldn&#39;t Be Either</h2><p>For example, Apple is up 44% YTD and trades for 30.3x earnings, but most analysts are shockingly revising its earnings estimates downward! Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven&#39;t been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called &#34;kitchen sink&#34; strategy where companies or political leaders dump all the bad news at once rather than let it trickle out.</p><p>I&#39;m sure people have fun talking about a tech &#34;singularity&#34; on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple? Because it&#39;s about 8% of the S&amp;P 500&#39;s market cap, while representing a much smaller share of the index&#39;s profit. Together, the top 10 holdings in the S&amp;P 500 make up over 30% of the index. Historically this level of concentration of risk is a red flag. Another issue is lack of breadth, which has gotten superficially better with small caps rallying, but largely due to a series of short squeezes in heavily shorted, doomed companies.</p><p>Microsoft is another interesting valuation story, up 36% for the year and trading for roughly 33.9x earnings. MSFT is actually showing some growth, and its earnings should come in about 4.8% higher than last year. For FY 2024, analysts have revised estimates upwards by a 2-3% over the past few months. However, since the introduction of Chat GPT in late 2022, MSFT earnings estimates are actually lower. Professional analysts who follow Microsoft think the trajectory of their earnings is flat or slightly improved by its AI investments, while retail traders expect the moon on a silver platter. Why might this be?</p><ul><li><p>For one, Microsoft paid $10 billion for half of OpenAI (they don&#39;t own the whole thing, contrary to what many traders might think).</p></li><li><p>Second, tech companies have been subject to a series of sneaky corporate tax hikes starting in January of this year.</p></li><li><p>Third, interest rates have gone up markedly, meaning that companies will eventually have to replace their dirt-cheap corporate debt from the ZIRP years with expensive debt. Microsoft isn&#39;t a big offender with ramping up borrowing, but a lot of Big Tech companies are. MSFT isn&#39;t as bad as the others, but 33.9x is a high multiple compared to even some of the more optimistic analysts.</p></li></ul><p>Outside of the blue chips and into the second tier of the more aggressive growers, things get dicier. Amazon is roughly breaking even while facing steep increases in interest costs on corporate debt. Additionally, the company bears the full brunt of inflation with a large workforce and massive capital expenditure needs. As such, Amazon is seeing a steady deterioration in earnings estimates. To continue to grow, the company will have to issue new debt at much higher interest rates than they&#39;ve done so far, further pressuring profitability. Tesla trades for 70x projected earnings, and earnings estimates have been relentlessly revised downward as the company finds itself locked in a price war with competitors across the globe. How is Tesla going to grow earnings when they&#39;re forced to cut prices to maintain growth? Tesla could be the second best-selling automaker in the world but the stock could fall 80-90% from here due to competition. With Nvidia, one looks at the valuation and then looks at the financial statements and wonders if they&#39;re even connected at all. This small group of stocks, with these middling fundamentals, is driving the entire market. Without them, the index would be flat or down.</p><p>AI is great, but it&#39;s been around for much longer than you think. I worked on a corporate AI project in 2020: using an AI chatbot to help downsize a call center. As early as 2016, companies were pitching AI-generated content to publishers. AI likely will be able to help some companies improve their margins, but the data is clearly showing that its effect on the economy is being outweighed by much larger macro factors like interest rates, taxes, and even the opioid crisis. You should expect incremental productivity improvements from AI, but don&#39;t pay 150x earnings to hucksters for them!</p><p>And if the boldest hype about AI is true, then you probably don&#39;t have to worry about losing purchasing power because of it. If tech companies truly decimate their highly paid labor forces, then it will pull a massive amount of demand out of the economy as hundreds of thousands of six-figure tech earners find themselves out of a job, while the shareholders who benefit are likely to simply sit on the money rather than spend it.</p><h2>Analysts Priced A 2023 Recession And A 2024 Earnings Boom</h2><p>For their part, analysts had expected a mild recession in early 2023, followed by a robust recovery in earnings in late 2023 and 2024. However, despite subtle signs of weakening, the business cycle has yet to fully turn. The Fed had been expected to start cutting interest rates now, and instead, they&#39;re not even done hiking. That means that the robust earnings recovery in 2024 coming off the business cycle trough is likely not going to happen. Earnings estimates have perked up in the past few weeks, but the hidden driver there is the recent weakness in the US dollar, which disproportionately helped Big Tech. Should the global economy weaken, this could catch investors offside if the dollar strengthens again, as it typically does in times of global recession.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/0091af902f7808c1f95a3e50679b3d5f\" tg-width=\"640\" tg-height=\"366\"/></p><p>US/International Revenue Breakdown (FactSet)</p><p>These are the current analyst consensus estimates for 2023 earnings. Note the big recovery expected starting in Q3.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/af806efe3f161e89b097c836d2d98093\" tg-width=\"640\" tg-height=\"372\"/></p><p>2023 S&amp;P 500 Earnings Estimates (FactSet)</p><p>And these are the consensus estimates for 2024.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/6376dfff185d27c6f82b84f619370556\" tg-width=\"640\" tg-height=\"361\"/></p><p>2024 S&amp;P 500 Earnings Estimates (FactSet)</p><p>Estimates are coming down. It&#39;s normal for future earnings estimates to be overly optimistic, but what it does mean is that stocks are quite expensive. If you take the earnings estimates for 2023 at face value, then stocks are trading for roughly 19.5x earnings. If you&#39;re more skeptical about how these earnings tend to be revised down, then stocks are trading for 22x earnings or more.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/0f786fb4efe9cfe6e16084b185d35c20\" tg-width=\"640\" tg-height=\"338\"/></p><p>S&amp;P 500 Earnings Estimates vs. Actuals (Yardeni Research)</p><p>These valuations all are priced against the most important number in finance, which is the rate on cash. Cash currently pays about 5.2%, which means that you officially can get more return by parking your money in cash than you can by investing in the premier businesses in America. However, after 10+ years of no alternative to stocks, investors now have a clear alternative in cash. Additionally, should stocks fall sharply in the future, you can switch back into stocks at a moment&#39;s notice and buy from panicked/distressed sellers. With the Fed hiking more, your return from cash is not only the 5.5% or more that you&#39;ll earn but also the optionality you gain by getting what&#39;s essentially a free option to buy stocks after a correction/crash.</p><h2>Why Stocks Often Rally When The Economy Starts To Weaken</h2><p>Historically, it&#39;s actually typical for stocks to surge as the yield curve inverts. This is because investors tend to be shortsighted and think that Fed pivots are the key to profit. However, this tends to end poorly, as yield curve inversions tend to foretell economic pain ahead. Bond investors see the pain in the economy coming 12+ months out, while stock bulls tend to react far more to changes in sentiment and current news.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/06fdffa99bde7cefca7d7f2edcb37a27\" tg-width=\"640\" tg-height=\"279\"/></p><p>Stock Returns After Inverted Yield Curve (Leuthold via Bloomberg)</p><p>This data shows that on average, stocks tend to rally anywhere 13% on average in the 6 months after the yield curve fully inverts. However, the final low isn&#39;t reached until over a year later on average.</p><p>If this rally plays out like historical rallies facing shaky economic fundamentals and a deeply inverted yield curve, stocks might fall 35% from here to 2800, finally bottoming sometime in 2024. Due to how high valuations are currently and how constrained fiscal policy is by high debt levels, this may be conservative. Economic expansions tend to be associated with quiet changes. Similarly, unemployment rises like a rocket but falls like a feather.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/ab6e6077def6ddeb2a82df24e65bc6a1\" tg-width=\"635\" tg-height=\"417\"/></p><p>Data by YCharts</p><h2>Bottom Line</h2><p>Stocks crossed the threshold for a bull market, but it doesn&#39;t change the reality on the ground. The Fed is likely to keep hiking interest rates to balance the economy, and corporate profits should continue to slowly fall. Markets have an amazing capacity to do crazy things, but there&#39;s only so far that things can stretch. Far from being an unstoppable surge driven by fundamentals, this year&#39;s bull market looks increasingly driven by speculation, not by underlying corporate fundamentals. If they believe the business cycle has been legislated out of existence then investors can pile in here all they want. However, if history is any guide, they&#39;re likely to be disappointed with their results.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>S&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nS&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-06-12 08:01 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards><strong>Seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>After rallying 20% off the lows in October 2022, the S&P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{".SPX":"S&P 500 Index",".IXIC":"NASDAQ Composite",".DJI":"道琼斯"},"source_url":"https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2342547444","content_text":"After rallying 20% off the lows in October 2022, the S&P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, Microsoft (MSFT) up 36%, Nvidia (NVDA) up 170%, Tesla (TSLA) up 126%, Amazon (AMZN) up 43%, and Google (GOOG) up 37%. These performance figures leave little doubt as to whether this rally counts as a bull market. The problem, of course, is that the bull market is concentrated in only a handful of stocks, and the stocks that are leading it have enormous valuations compared to their underlying earnings. With economic signals flashing warnings signs and valuations stretched, this rally has the hallmarks of a late-stage bull run continued from the easy-money era. Moreover, there are some fundamental signs that the bull run may soon run out of steam.Data by YChartsI'm Not Comfortable With Current Mega-Cap Valuations, And You Shouldn't Be EitherFor example, Apple is up 44% YTD and trades for 30.3x earnings, but most analysts are shockingly revising its earnings estimates downward! Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven't been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called \"kitchen sink\" strategy where companies or political leaders dump all the bad news at once rather than let it trickle out.I'm sure people have fun talking about a tech \"singularity\" on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple? Because it's about 8% of the S&P 500's market cap, while representing a much smaller share of the index's profit. Together, the top 10 holdings in the S&P 500 make up over 30% of the index. Historically this level of concentration of risk is a red flag. Another issue is lack of breadth, which has gotten superficially better with small caps rallying, but largely due to a series of short squeezes in heavily shorted, doomed companies.Microsoft is another interesting valuation story, up 36% for the year and trading for roughly 33.9x earnings. MSFT is actually showing some growth, and its earnings should come in about 4.8% higher than last year. For FY 2024, analysts have revised estimates upwards by a 2-3% over the past few months. However, since the introduction of Chat GPT in late 2022, MSFT earnings estimates are actually lower. Professional analysts who follow Microsoft think the trajectory of their earnings is flat or slightly improved by its AI investments, while retail traders expect the moon on a silver platter. Why might this be?For one, Microsoft paid $10 billion for half of OpenAI (they don't own the whole thing, contrary to what many traders might think).Second, tech companies have been subject to a series of sneaky corporate tax hikes starting in January of this year.Third, interest rates have gone up markedly, meaning that companies will eventually have to replace their dirt-cheap corporate debt from the ZIRP years with expensive debt. Microsoft isn't a big offender with ramping up borrowing, but a lot of Big Tech companies are. MSFT isn't as bad as the others, but 33.9x is a high multiple compared to even some of the more optimistic analysts.Outside of the blue chips and into the second tier of the more aggressive growers, things get dicier. Amazon is roughly breaking even while facing steep increases in interest costs on corporate debt. Additionally, the company bears the full brunt of inflation with a large workforce and massive capital expenditure needs. As such, Amazon is seeing a steady deterioration in earnings estimates. To continue to grow, the company will have to issue new debt at much higher interest rates than they've done so far, further pressuring profitability. Tesla trades for 70x projected earnings, and earnings estimates have been relentlessly revised downward as the company finds itself locked in a price war with competitors across the globe. How is Tesla going to grow earnings when they're forced to cut prices to maintain growth? Tesla could be the second best-selling automaker in the world but the stock could fall 80-90% from here due to competition. With Nvidia, one looks at the valuation and then looks at the financial statements and wonders if they're even connected at all. This small group of stocks, with these middling fundamentals, is driving the entire market. Without them, the index would be flat or down.AI is great, but it's been around for much longer than you think. I worked on a corporate AI project in 2020: using an AI chatbot to help downsize a call center. As early as 2016, companies were pitching AI-generated content to publishers. AI likely will be able to help some companies improve their margins, but the data is clearly showing that its effect on the economy is being outweighed by much larger macro factors like interest rates, taxes, and even the opioid crisis. You should expect incremental productivity improvements from AI, but don't pay 150x earnings to hucksters for them!And if the boldest hype about AI is true, then you probably don't have to worry about losing purchasing power because of it. If tech companies truly decimate their highly paid labor forces, then it will pull a massive amount of demand out of the economy as hundreds of thousands of six-figure tech earners find themselves out of a job, while the shareholders who benefit are likely to simply sit on the money rather than spend it.Analysts Priced A 2023 Recession And A 2024 Earnings BoomFor their part, analysts had expected a mild recession in early 2023, followed by a robust recovery in earnings in late 2023 and 2024. However, despite subtle signs of weakening, the business cycle has yet to fully turn. The Fed had been expected to start cutting interest rates now, and instead, they're not even done hiking. That means that the robust earnings recovery in 2024 coming off the business cycle trough is likely not going to happen. Earnings estimates have perked up in the past few weeks, but the hidden driver there is the recent weakness in the US dollar, which disproportionately helped Big Tech. Should the global economy weaken, this could catch investors offside if the dollar strengthens again, as it typically does in times of global recession.US/International Revenue Breakdown (FactSet)These are the current analyst consensus estimates for 2023 earnings. Note the big recovery expected starting in Q3.2023 S&P 500 Earnings Estimates (FactSet)And these are the consensus estimates for 2024.2024 S&P 500 Earnings Estimates (FactSet)Estimates are coming down. It's normal for future earnings estimates to be overly optimistic, but what it does mean is that stocks are quite expensive. If you take the earnings estimates for 2023 at face value, then stocks are trading for roughly 19.5x earnings. If you're more skeptical about how these earnings tend to be revised down, then stocks are trading for 22x earnings or more.S&P 500 Earnings Estimates vs. Actuals (Yardeni Research)These valuations all are priced against the most important number in finance, which is the rate on cash. Cash currently pays about 5.2%, which means that you officially can get more return by parking your money in cash than you can by investing in the premier businesses in America. However, after 10+ years of no alternative to stocks, investors now have a clear alternative in cash. Additionally, should stocks fall sharply in the future, you can switch back into stocks at a moment's notice and buy from panicked/distressed sellers. With the Fed hiking more, your return from cash is not only the 5.5% or more that you'll earn but also the optionality you gain by getting what's essentially a free option to buy stocks after a correction/crash.Why Stocks Often Rally When The Economy Starts To WeakenHistorically, it's actually typical for stocks to surge as the yield curve inverts. This is because investors tend to be shortsighted and think that Fed pivots are the key to profit. However, this tends to end poorly, as yield curve inversions tend to foretell economic pain ahead. Bond investors see the pain in the economy coming 12+ months out, while stock bulls tend to react far more to changes in sentiment and current news.Stock Returns After Inverted Yield Curve (Leuthold via Bloomberg)This data shows that on average, stocks tend to rally anywhere 13% on average in the 6 months after the yield curve fully inverts. However, the final low isn't reached until over a year later on average.If this rally plays out like historical rallies facing shaky economic fundamentals and a deeply inverted yield curve, stocks might fall 35% from here to 2800, finally bottoming sometime in 2024. Due to how high valuations are currently and how constrained fiscal policy is by high debt levels, this may be conservative. Economic expansions tend to be associated with quiet changes. Similarly, unemployment rises like a rocket but falls like a feather.Data by YChartsBottom LineStocks crossed the threshold for a bull market, but it doesn't change the reality on the ground. The Fed is likely to keep hiking interest rates to balance the economy, and corporate profits should continue to slowly fall. Markets have an amazing capacity to do crazy things, but there's only so far that things can stretch. Far from being an unstoppable surge driven by fundamentals, this year's bull market looks increasingly driven by speculation, not by underlying corporate fundamentals. If they believe the business cycle has been legislated out of existence then investors can pile in here all they want. However, if history is any guide, they're likely to be disappointed with their results.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":186391541071984,"gmtCreate":1686545214248,"gmtModify":1686545219180,"author":{"id":"4101978790494150","authorId":"4101978790494150","name":"phongy 45","avatar":"https://static.tigerbbs.com/f6f41e543307358288f75d55fe347ad2","vip":1,"crmLevel":2,"crmLevelSwitch":0,"authorIdStr":"4101978790494150","idStr":"4101978790494150"},"htmlText":"Nice ...&nbsp;","listText":"Nice ...&nbsp;","text":"Nice ...","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/186391541071984","repostId":2342547444,"repostType":2,"repost":{"id":"2342547444","pubTimestamp":1686528068,"share":"https://ttm.financial/m/news/2342547444?lang=&edition=fundamental","pubTime":"2023-06-12 08:01","market":"us","language":"en","title":"S&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?","url":"https://stock-news.laohu8.com/highlight/detail?id=2342547444","media":"Seekingalpha","summary":"Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven't been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called \"kitchen sink\" strategy where companies or political leaders dump all the bad news at once rather than let it trickle out. I'm sure people have fun talking about a tech \"singularity\" on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple?","content":"<html><head></head><body><p>After rallying 20% off the lows in October 2022, the S&amp;P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, Microsoft (MSFT) up 36%, Nvidia (NVDA) up 170%, Tesla (TSLA) up 126%, Amazon (AMZN) up 43%, and Google (GOOG) up 37%. These performance figures leave little doubt as to whether this rally counts as a bull market. The problem, of course, is that the bull market is concentrated in only a handful of stocks, and the stocks that are leading it have enormous valuations compared to their underlying earnings. With economic signals flashing warnings signs and valuations stretched, this rally has the hallmarks of a late-stage bull run continued from the easy-money era. Moreover, there are some fundamental signs that the bull run may soon run out of steam.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/8c471faae90db5f03960471ca6067337\" tg-width=\"635\" tg-height=\"417\"/></p><p>Data by YCharts</p><h2>I&#39;m Not Comfortable With Current Mega-Cap Valuations, And You Shouldn&#39;t Be Either</h2><p>For example, Apple is up 44% YTD and trades for 30.3x earnings, but most analysts are shockingly revising its earnings estimates downward! Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven&#39;t been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called &#34;kitchen sink&#34; strategy where companies or political leaders dump all the bad news at once rather than let it trickle out.</p><p>I&#39;m sure people have fun talking about a tech &#34;singularity&#34; on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple? Because it&#39;s about 8% of the S&amp;P 500&#39;s market cap, while representing a much smaller share of the index&#39;s profit. Together, the top 10 holdings in the S&amp;P 500 make up over 30% of the index. Historically this level of concentration of risk is a red flag. Another issue is lack of breadth, which has gotten superficially better with small caps rallying, but largely due to a series of short squeezes in heavily shorted, doomed companies.</p><p>Microsoft is another interesting valuation story, up 36% for the year and trading for roughly 33.9x earnings. MSFT is actually showing some growth, and its earnings should come in about 4.8% higher than last year. For FY 2024, analysts have revised estimates upwards by a 2-3% over the past few months. However, since the introduction of Chat GPT in late 2022, MSFT earnings estimates are actually lower. Professional analysts who follow Microsoft think the trajectory of their earnings is flat or slightly improved by its AI investments, while retail traders expect the moon on a silver platter. Why might this be?</p><ul><li><p>For one, Microsoft paid $10 billion for half of OpenAI (they don&#39;t own the whole thing, contrary to what many traders might think).</p></li><li><p>Second, tech companies have been subject to a series of sneaky corporate tax hikes starting in January of this year.</p></li><li><p>Third, interest rates have gone up markedly, meaning that companies will eventually have to replace their dirt-cheap corporate debt from the ZIRP years with expensive debt. Microsoft isn&#39;t a big offender with ramping up borrowing, but a lot of Big Tech companies are. MSFT isn&#39;t as bad as the others, but 33.9x is a high multiple compared to even some of the more optimistic analysts.</p></li></ul><p>Outside of the blue chips and into the second tier of the more aggressive growers, things get dicier. Amazon is roughly breaking even while facing steep increases in interest costs on corporate debt. Additionally, the company bears the full brunt of inflation with a large workforce and massive capital expenditure needs. As such, Amazon is seeing a steady deterioration in earnings estimates. To continue to grow, the company will have to issue new debt at much higher interest rates than they&#39;ve done so far, further pressuring profitability. Tesla trades for 70x projected earnings, and earnings estimates have been relentlessly revised downward as the company finds itself locked in a price war with competitors across the globe. How is Tesla going to grow earnings when they&#39;re forced to cut prices to maintain growth? Tesla could be the second best-selling automaker in the world but the stock could fall 80-90% from here due to competition. With Nvidia, one looks at the valuation and then looks at the financial statements and wonders if they&#39;re even connected at all. This small group of stocks, with these middling fundamentals, is driving the entire market. Without them, the index would be flat or down.</p><p>AI is great, but it&#39;s been around for much longer than you think. I worked on a corporate AI project in 2020: using an AI chatbot to help downsize a call center. As early as 2016, companies were pitching AI-generated content to publishers. AI likely will be able to help some companies improve their margins, but the data is clearly showing that its effect on the economy is being outweighed by much larger macro factors like interest rates, taxes, and even the opioid crisis. You should expect incremental productivity improvements from AI, but don&#39;t pay 150x earnings to hucksters for them!</p><p>And if the boldest hype about AI is true, then you probably don&#39;t have to worry about losing purchasing power because of it. If tech companies truly decimate their highly paid labor forces, then it will pull a massive amount of demand out of the economy as hundreds of thousands of six-figure tech earners find themselves out of a job, while the shareholders who benefit are likely to simply sit on the money rather than spend it.</p><h2>Analysts Priced A 2023 Recession And A 2024 Earnings Boom</h2><p>For their part, analysts had expected a mild recession in early 2023, followed by a robust recovery in earnings in late 2023 and 2024. However, despite subtle signs of weakening, the business cycle has yet to fully turn. The Fed had been expected to start cutting interest rates now, and instead, they&#39;re not even done hiking. That means that the robust earnings recovery in 2024 coming off the business cycle trough is likely not going to happen. Earnings estimates have perked up in the past few weeks, but the hidden driver there is the recent weakness in the US dollar, which disproportionately helped Big Tech. Should the global economy weaken, this could catch investors offside if the dollar strengthens again, as it typically does in times of global recession.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/0091af902f7808c1f95a3e50679b3d5f\" tg-width=\"640\" tg-height=\"366\"/></p><p>US/International Revenue Breakdown (FactSet)</p><p>These are the current analyst consensus estimates for 2023 earnings. Note the big recovery expected starting in Q3.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/af806efe3f161e89b097c836d2d98093\" tg-width=\"640\" tg-height=\"372\"/></p><p>2023 S&amp;P 500 Earnings Estimates (FactSet)</p><p>And these are the consensus estimates for 2024.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/6376dfff185d27c6f82b84f619370556\" tg-width=\"640\" tg-height=\"361\"/></p><p>2024 S&amp;P 500 Earnings Estimates (FactSet)</p><p>Estimates are coming down. It&#39;s normal for future earnings estimates to be overly optimistic, but what it does mean is that stocks are quite expensive. If you take the earnings estimates for 2023 at face value, then stocks are trading for roughly 19.5x earnings. If you&#39;re more skeptical about how these earnings tend to be revised down, then stocks are trading for 22x earnings or more.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/0f786fb4efe9cfe6e16084b185d35c20\" tg-width=\"640\" tg-height=\"338\"/></p><p>S&amp;P 500 Earnings Estimates vs. Actuals (Yardeni Research)</p><p>These valuations all are priced against the most important number in finance, which is the rate on cash. Cash currently pays about 5.2%, which means that you officially can get more return by parking your money in cash than you can by investing in the premier businesses in America. However, after 10+ years of no alternative to stocks, investors now have a clear alternative in cash. Additionally, should stocks fall sharply in the future, you can switch back into stocks at a moment&#39;s notice and buy from panicked/distressed sellers. With the Fed hiking more, your return from cash is not only the 5.5% or more that you&#39;ll earn but also the optionality you gain by getting what&#39;s essentially a free option to buy stocks after a correction/crash.</p><h2>Why Stocks Often Rally When The Economy Starts To Weaken</h2><p>Historically, it&#39;s actually typical for stocks to surge as the yield curve inverts. This is because investors tend to be shortsighted and think that Fed pivots are the key to profit. However, this tends to end poorly, as yield curve inversions tend to foretell economic pain ahead. Bond investors see the pain in the economy coming 12+ months out, while stock bulls tend to react far more to changes in sentiment and current news.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/06fdffa99bde7cefca7d7f2edcb37a27\" tg-width=\"640\" tg-height=\"279\"/></p><p>Stock Returns After Inverted Yield Curve (Leuthold via Bloomberg)</p><p>This data shows that on average, stocks tend to rally anywhere 13% on average in the 6 months after the yield curve fully inverts. However, the final low isn&#39;t reached until over a year later on average.</p><p>If this rally plays out like historical rallies facing shaky economic fundamentals and a deeply inverted yield curve, stocks might fall 35% from here to 2800, finally bottoming sometime in 2024. Due to how high valuations are currently and how constrained fiscal policy is by high debt levels, this may be conservative. Economic expansions tend to be associated with quiet changes. Similarly, unemployment rises like a rocket but falls like a feather.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/ab6e6077def6ddeb2a82df24e65bc6a1\" tg-width=\"635\" tg-height=\"417\"/></p><p>Data by YCharts</p><h2>Bottom Line</h2><p>Stocks crossed the threshold for a bull market, but it doesn&#39;t change the reality on the ground. The Fed is likely to keep hiking interest rates to balance the economy, and corporate profits should continue to slowly fall. Markets have an amazing capacity to do crazy things, but there&#39;s only so far that things can stretch. Far from being an unstoppable surge driven by fundamentals, this year&#39;s bull market looks increasingly driven by speculation, not by underlying corporate fundamentals. If they believe the business cycle has been legislated out of existence then investors can pile in here all they want. However, if history is any guide, they&#39;re likely to be disappointed with their results.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>S&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nS&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-06-12 08:01 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards><strong>Seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>After rallying 20% off the lows in October 2022, the S&P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{".SPX":"S&P 500 Index",".IXIC":"NASDAQ Composite",".DJI":"道琼斯"},"source_url":"https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2342547444","content_text":"After rallying 20% off the lows in October 2022, the S&P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, Microsoft (MSFT) up 36%, Nvidia (NVDA) up 170%, Tesla (TSLA) up 126%, Amazon (AMZN) up 43%, and Google (GOOG) up 37%. These performance figures leave little doubt as to whether this rally counts as a bull market. The problem, of course, is that the bull market is concentrated in only a handful of stocks, and the stocks that are leading it have enormous valuations compared to their underlying earnings. With economic signals flashing warnings signs and valuations stretched, this rally has the hallmarks of a late-stage bull run continued from the easy-money era. Moreover, there are some fundamental signs that the bull run may soon run out of steam.Data by YChartsI'm Not Comfortable With Current Mega-Cap Valuations, And You Shouldn't Be EitherFor example, Apple is up 44% YTD and trades for 30.3x earnings, but most analysts are shockingly revising its earnings estimates downward! Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven't been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called \"kitchen sink\" strategy where companies or political leaders dump all the bad news at once rather than let it trickle out.I'm sure people have fun talking about a tech \"singularity\" on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple? Because it's about 8% of the S&P 500's market cap, while representing a much smaller share of the index's profit. Together, the top 10 holdings in the S&P 500 make up over 30% of the index. Historically this level of concentration of risk is a red flag. Another issue is lack of breadth, which has gotten superficially better with small caps rallying, but largely due to a series of short squeezes in heavily shorted, doomed companies.Microsoft is another interesting valuation story, up 36% for the year and trading for roughly 33.9x earnings. MSFT is actually showing some growth, and its earnings should come in about 4.8% higher than last year. For FY 2024, analysts have revised estimates upwards by a 2-3% over the past few months. However, since the introduction of Chat GPT in late 2022, MSFT earnings estimates are actually lower. Professional analysts who follow Microsoft think the trajectory of their earnings is flat or slightly improved by its AI investments, while retail traders expect the moon on a silver platter. Why might this be?For one, Microsoft paid $10 billion for half of OpenAI (they don't own the whole thing, contrary to what many traders might think).Second, tech companies have been subject to a series of sneaky corporate tax hikes starting in January of this year.Third, interest rates have gone up markedly, meaning that companies will eventually have to replace their dirt-cheap corporate debt from the ZIRP years with expensive debt. Microsoft isn't a big offender with ramping up borrowing, but a lot of Big Tech companies are. MSFT isn't as bad as the others, but 33.9x is a high multiple compared to even some of the more optimistic analysts.Outside of the blue chips and into the second tier of the more aggressive growers, things get dicier. Amazon is roughly breaking even while facing steep increases in interest costs on corporate debt. Additionally, the company bears the full brunt of inflation with a large workforce and massive capital expenditure needs. As such, Amazon is seeing a steady deterioration in earnings estimates. To continue to grow, the company will have to issue new debt at much higher interest rates than they've done so far, further pressuring profitability. Tesla trades for 70x projected earnings, and earnings estimates have been relentlessly revised downward as the company finds itself locked in a price war with competitors across the globe. How is Tesla going to grow earnings when they're forced to cut prices to maintain growth? Tesla could be the second best-selling automaker in the world but the stock could fall 80-90% from here due to competition. With Nvidia, one looks at the valuation and then looks at the financial statements and wonders if they're even connected at all. This small group of stocks, with these middling fundamentals, is driving the entire market. Without them, the index would be flat or down.AI is great, but it's been around for much longer than you think. I worked on a corporate AI project in 2020: using an AI chatbot to help downsize a call center. As early as 2016, companies were pitching AI-generated content to publishers. AI likely will be able to help some companies improve their margins, but the data is clearly showing that its effect on the economy is being outweighed by much larger macro factors like interest rates, taxes, and even the opioid crisis. You should expect incremental productivity improvements from AI, but don't pay 150x earnings to hucksters for them!And if the boldest hype about AI is true, then you probably don't have to worry about losing purchasing power because of it. If tech companies truly decimate their highly paid labor forces, then it will pull a massive amount of demand out of the economy as hundreds of thousands of six-figure tech earners find themselves out of a job, while the shareholders who benefit are likely to simply sit on the money rather than spend it.Analysts Priced A 2023 Recession And A 2024 Earnings BoomFor their part, analysts had expected a mild recession in early 2023, followed by a robust recovery in earnings in late 2023 and 2024. However, despite subtle signs of weakening, the business cycle has yet to fully turn. The Fed had been expected to start cutting interest rates now, and instead, they're not even done hiking. That means that the robust earnings recovery in 2024 coming off the business cycle trough is likely not going to happen. Earnings estimates have perked up in the past few weeks, but the hidden driver there is the recent weakness in the US dollar, which disproportionately helped Big Tech. Should the global economy weaken, this could catch investors offside if the dollar strengthens again, as it typically does in times of global recession.US/International Revenue Breakdown (FactSet)These are the current analyst consensus estimates for 2023 earnings. Note the big recovery expected starting in Q3.2023 S&P 500 Earnings Estimates (FactSet)And these are the consensus estimates for 2024.2024 S&P 500 Earnings Estimates (FactSet)Estimates are coming down. It's normal for future earnings estimates to be overly optimistic, but what it does mean is that stocks are quite expensive. If you take the earnings estimates for 2023 at face value, then stocks are trading for roughly 19.5x earnings. If you're more skeptical about how these earnings tend to be revised down, then stocks are trading for 22x earnings or more.S&P 500 Earnings Estimates vs. Actuals (Yardeni Research)These valuations all are priced against the most important number in finance, which is the rate on cash. Cash currently pays about 5.2%, which means that you officially can get more return by parking your money in cash than you can by investing in the premier businesses in America. However, after 10+ years of no alternative to stocks, investors now have a clear alternative in cash. Additionally, should stocks fall sharply in the future, you can switch back into stocks at a moment's notice and buy from panicked/distressed sellers. With the Fed hiking more, your return from cash is not only the 5.5% or more that you'll earn but also the optionality you gain by getting what's essentially a free option to buy stocks after a correction/crash.Why Stocks Often Rally When The Economy Starts To WeakenHistorically, it's actually typical for stocks to surge as the yield curve inverts. This is because investors tend to be shortsighted and think that Fed pivots are the key to profit. However, this tends to end poorly, as yield curve inversions tend to foretell economic pain ahead. Bond investors see the pain in the economy coming 12+ months out, while stock bulls tend to react far more to changes in sentiment and current news.Stock Returns After Inverted Yield Curve (Leuthold via Bloomberg)This data shows that on average, stocks tend to rally anywhere 13% on average in the 6 months after the yield curve fully inverts. However, the final low isn't reached until over a year later on average.If this rally plays out like historical rallies facing shaky economic fundamentals and a deeply inverted yield curve, stocks might fall 35% from here to 2800, finally bottoming sometime in 2024. Due to how high valuations are currently and how constrained fiscal policy is by high debt levels, this may be conservative. Economic expansions tend to be associated with quiet changes. Similarly, unemployment rises like a rocket but falls like a feather.Data by YChartsBottom LineStocks crossed the threshold for a bull market, but it doesn't change the reality on the ground. The Fed is likely to keep hiking interest rates to balance the economy, and corporate profits should continue to slowly fall. Markets have an amazing capacity to do crazy things, but there's only so far that things can stretch. Far from being an unstoppable surge driven by fundamentals, this year's bull market looks increasingly driven by speculation, not by underlying corporate fundamentals. If they believe the business cycle has been legislated out of existence then investors can pile in here all they want. However, if history is any guide, they're likely to be disappointed with their results.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":186390602235936,"gmtCreate":1686544793499,"gmtModify":1686547944540,"author":{"id":"4109816621463940","authorId":"4109816621463940","name":"Musky","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":5,"crmLevelSwitch":0,"authorIdStr":"4109816621463940","idStr":"4109816621463940"},"htmlText":"As u hv correctly said history is a guide. This time is goong to b different. So far the bears have been wrong because they r using the old model to evaluate the current situation which is quite different from the past.&nbsp;&nbsp;One key point that most bears overlook is the strength of employment. US GDP is 2/3 dependent on the consumers. So long as people r gainfully employed, there will b no recession n housing market will not crash albeit business will stay slow in a high rate environment. To conclude, big tech n AI will continue to lead the mkt to new high. Once fed pivot the rest off the mkt will play catch up","listText":"As u hv correctly said history is a guide. This time is goong to b different. So far the bears have been wrong because they r using the old model to evaluate the current situation which is quite different from the past.&nbsp;&nbsp;One key point that most bears overlook is the strength of employment. US GDP is 2/3 dependent on the consumers. So long as people r gainfully employed, there will b no recession n housing market will not crash albeit business will stay slow in a high rate environment. To conclude, big tech n AI will continue to lead the mkt to new high. Once fed pivot the rest off the mkt will play catch up","text":"As u hv correctly said history is a guide. This time is goong to b different. So far the bears have been wrong because they r using the old model to evaluate the current situation which is quite different from the past. One key point that most bears overlook is the strength of employment. US GDP is 2/3 dependent on the consumers. So long as people r gainfully employed, there will b no recession n housing market will not crash albeit business will stay slow in a high rate environment. To conclude, big tech n AI will continue to lead the mkt to new high. Once fed pivot the rest off the mkt will play catch up","images":[],"top":1,"highlighted":2,"essential":1,"paper":1,"likeSize":15,"commentSize":11,"repostSize":0,"link":"https://ttm.financial/post/186390602235936","repostId":2342547444,"repostType":2,"repost":{"id":"2342547444","pubTimestamp":1686528068,"share":"https://ttm.financial/m/news/2342547444?lang=&edition=fundamental","pubTime":"2023-06-12 08:01","market":"us","language":"en","title":"S&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?","url":"https://stock-news.laohu8.com/highlight/detail?id=2342547444","media":"Seekingalpha","summary":"Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven't been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called \"kitchen sink\" strategy where companies or political leaders dump all the bad news at once rather than let it trickle out. I'm sure people have fun talking about a tech \"singularity\" on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple?","content":"<html><head></head><body><p>After rallying 20% off the lows in October 2022, the S&amp;P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, Microsoft (MSFT) up 36%, Nvidia (NVDA) up 170%, Tesla (TSLA) up 126%, Amazon (AMZN) up 43%, and Google (GOOG) up 37%. These performance figures leave little doubt as to whether this rally counts as a bull market. The problem, of course, is that the bull market is concentrated in only a handful of stocks, and the stocks that are leading it have enormous valuations compared to their underlying earnings. With economic signals flashing warnings signs and valuations stretched, this rally has the hallmarks of a late-stage bull run continued from the easy-money era. Moreover, there are some fundamental signs that the bull run may soon run out of steam.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/8c471faae90db5f03960471ca6067337\" tg-width=\"635\" tg-height=\"417\"/></p><p>Data by YCharts</p><h2>I&#39;m Not Comfortable With Current Mega-Cap Valuations, And You Shouldn&#39;t Be Either</h2><p>For example, Apple is up 44% YTD and trades for 30.3x earnings, but most analysts are shockingly revising its earnings estimates downward! Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven&#39;t been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called &#34;kitchen sink&#34; strategy where companies or political leaders dump all the bad news at once rather than let it trickle out.</p><p>I&#39;m sure people have fun talking about a tech &#34;singularity&#34; on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple? Because it&#39;s about 8% of the S&amp;P 500&#39;s market cap, while representing a much smaller share of the index&#39;s profit. Together, the top 10 holdings in the S&amp;P 500 make up over 30% of the index. Historically this level of concentration of risk is a red flag. Another issue is lack of breadth, which has gotten superficially better with small caps rallying, but largely due to a series of short squeezes in heavily shorted, doomed companies.</p><p>Microsoft is another interesting valuation story, up 36% for the year and trading for roughly 33.9x earnings. MSFT is actually showing some growth, and its earnings should come in about 4.8% higher than last year. For FY 2024, analysts have revised estimates upwards by a 2-3% over the past few months. However, since the introduction of Chat GPT in late 2022, MSFT earnings estimates are actually lower. Professional analysts who follow Microsoft think the trajectory of their earnings is flat or slightly improved by its AI investments, while retail traders expect the moon on a silver platter. Why might this be?</p><ul><li><p>For one, Microsoft paid $10 billion for half of OpenAI (they don&#39;t own the whole thing, contrary to what many traders might think).</p></li><li><p>Second, tech companies have been subject to a series of sneaky corporate tax hikes starting in January of this year.</p></li><li><p>Third, interest rates have gone up markedly, meaning that companies will eventually have to replace their dirt-cheap corporate debt from the ZIRP years with expensive debt. Microsoft isn&#39;t a big offender with ramping up borrowing, but a lot of Big Tech companies are. MSFT isn&#39;t as bad as the others, but 33.9x is a high multiple compared to even some of the more optimistic analysts.</p></li></ul><p>Outside of the blue chips and into the second tier of the more aggressive growers, things get dicier. Amazon is roughly breaking even while facing steep increases in interest costs on corporate debt. Additionally, the company bears the full brunt of inflation with a large workforce and massive capital expenditure needs. As such, Amazon is seeing a steady deterioration in earnings estimates. To continue to grow, the company will have to issue new debt at much higher interest rates than they&#39;ve done so far, further pressuring profitability. Tesla trades for 70x projected earnings, and earnings estimates have been relentlessly revised downward as the company finds itself locked in a price war with competitors across the globe. How is Tesla going to grow earnings when they&#39;re forced to cut prices to maintain growth? Tesla could be the second best-selling automaker in the world but the stock could fall 80-90% from here due to competition. With Nvidia, one looks at the valuation and then looks at the financial statements and wonders if they&#39;re even connected at all. This small group of stocks, with these middling fundamentals, is driving the entire market. Without them, the index would be flat or down.</p><p>AI is great, but it&#39;s been around for much longer than you think. I worked on a corporate AI project in 2020: using an AI chatbot to help downsize a call center. As early as 2016, companies were pitching AI-generated content to publishers. AI likely will be able to help some companies improve their margins, but the data is clearly showing that its effect on the economy is being outweighed by much larger macro factors like interest rates, taxes, and even the opioid crisis. You should expect incremental productivity improvements from AI, but don&#39;t pay 150x earnings to hucksters for them!</p><p>And if the boldest hype about AI is true, then you probably don&#39;t have to worry about losing purchasing power because of it. If tech companies truly decimate their highly paid labor forces, then it will pull a massive amount of demand out of the economy as hundreds of thousands of six-figure tech earners find themselves out of a job, while the shareholders who benefit are likely to simply sit on the money rather than spend it.</p><h2>Analysts Priced A 2023 Recession And A 2024 Earnings Boom</h2><p>For their part, analysts had expected a mild recession in early 2023, followed by a robust recovery in earnings in late 2023 and 2024. However, despite subtle signs of weakening, the business cycle has yet to fully turn. The Fed had been expected to start cutting interest rates now, and instead, they&#39;re not even done hiking. That means that the robust earnings recovery in 2024 coming off the business cycle trough is likely not going to happen. Earnings estimates have perked up in the past few weeks, but the hidden driver there is the recent weakness in the US dollar, which disproportionately helped Big Tech. Should the global economy weaken, this could catch investors offside if the dollar strengthens again, as it typically does in times of global recession.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/0091af902f7808c1f95a3e50679b3d5f\" tg-width=\"640\" tg-height=\"366\"/></p><p>US/International Revenue Breakdown (FactSet)</p><p>These are the current analyst consensus estimates for 2023 earnings. Note the big recovery expected starting in Q3.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/af806efe3f161e89b097c836d2d98093\" tg-width=\"640\" tg-height=\"372\"/></p><p>2023 S&amp;P 500 Earnings Estimates (FactSet)</p><p>And these are the consensus estimates for 2024.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/6376dfff185d27c6f82b84f619370556\" tg-width=\"640\" tg-height=\"361\"/></p><p>2024 S&amp;P 500 Earnings Estimates (FactSet)</p><p>Estimates are coming down. It&#39;s normal for future earnings estimates to be overly optimistic, but what it does mean is that stocks are quite expensive. If you take the earnings estimates for 2023 at face value, then stocks are trading for roughly 19.5x earnings. If you&#39;re more skeptical about how these earnings tend to be revised down, then stocks are trading for 22x earnings or more.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/0f786fb4efe9cfe6e16084b185d35c20\" tg-width=\"640\" tg-height=\"338\"/></p><p>S&amp;P 500 Earnings Estimates vs. Actuals (Yardeni Research)</p><p>These valuations all are priced against the most important number in finance, which is the rate on cash. Cash currently pays about 5.2%, which means that you officially can get more return by parking your money in cash than you can by investing in the premier businesses in America. However, after 10+ years of no alternative to stocks, investors now have a clear alternative in cash. Additionally, should stocks fall sharply in the future, you can switch back into stocks at a moment&#39;s notice and buy from panicked/distressed sellers. With the Fed hiking more, your return from cash is not only the 5.5% or more that you&#39;ll earn but also the optionality you gain by getting what&#39;s essentially a free option to buy stocks after a correction/crash.</p><h2>Why Stocks Often Rally When The Economy Starts To Weaken</h2><p>Historically, it&#39;s actually typical for stocks to surge as the yield curve inverts. This is because investors tend to be shortsighted and think that Fed pivots are the key to profit. However, this tends to end poorly, as yield curve inversions tend to foretell economic pain ahead. Bond investors see the pain in the economy coming 12+ months out, while stock bulls tend to react far more to changes in sentiment and current news.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/06fdffa99bde7cefca7d7f2edcb37a27\" tg-width=\"640\" tg-height=\"279\"/></p><p>Stock Returns After Inverted Yield Curve (Leuthold via Bloomberg)</p><p>This data shows that on average, stocks tend to rally anywhere 13% on average in the 6 months after the yield curve fully inverts. However, the final low isn&#39;t reached until over a year later on average.</p><p>If this rally plays out like historical rallies facing shaky economic fundamentals and a deeply inverted yield curve, stocks might fall 35% from here to 2800, finally bottoming sometime in 2024. Due to how high valuations are currently and how constrained fiscal policy is by high debt levels, this may be conservative. Economic expansions tend to be associated with quiet changes. Similarly, unemployment rises like a rocket but falls like a feather.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/ab6e6077def6ddeb2a82df24e65bc6a1\" tg-width=\"635\" tg-height=\"417\"/></p><p>Data by YCharts</p><h2>Bottom Line</h2><p>Stocks crossed the threshold for a bull market, but it doesn&#39;t change the reality on the ground. The Fed is likely to keep hiking interest rates to balance the economy, and corporate profits should continue to slowly fall. Markets have an amazing capacity to do crazy things, but there&#39;s only so far that things can stretch. Far from being an unstoppable surge driven by fundamentals, this year&#39;s bull market looks increasingly driven by speculation, not by underlying corporate fundamentals. If they believe the business cycle has been legislated out of existence then investors can pile in here all they want. However, if history is any guide, they&#39;re likely to be disappointed with their results.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>S&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nS&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-06-12 08:01 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards><strong>Seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>After rallying 20% off the lows in October 2022, the S&P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{".SPX":"S&P 500 Index",".IXIC":"NASDAQ Composite",".DJI":"道琼斯"},"source_url":"https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2342547444","content_text":"After rallying 20% off the lows in October 2022, the S&P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, Microsoft (MSFT) up 36%, Nvidia (NVDA) up 170%, Tesla (TSLA) up 126%, Amazon (AMZN) up 43%, and Google (GOOG) up 37%. These performance figures leave little doubt as to whether this rally counts as a bull market. The problem, of course, is that the bull market is concentrated in only a handful of stocks, and the stocks that are leading it have enormous valuations compared to their underlying earnings. With economic signals flashing warnings signs and valuations stretched, this rally has the hallmarks of a late-stage bull run continued from the easy-money era. Moreover, there are some fundamental signs that the bull run may soon run out of steam.Data by YChartsI'm Not Comfortable With Current Mega-Cap Valuations, And You Shouldn't Be EitherFor example, Apple is up 44% YTD and trades for 30.3x earnings, but most analysts are shockingly revising its earnings estimates downward! Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven't been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called \"kitchen sink\" strategy where companies or political leaders dump all the bad news at once rather than let it trickle out.I'm sure people have fun talking about a tech \"singularity\" on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple? Because it's about 8% of the S&P 500's market cap, while representing a much smaller share of the index's profit. Together, the top 10 holdings in the S&P 500 make up over 30% of the index. Historically this level of concentration of risk is a red flag. Another issue is lack of breadth, which has gotten superficially better with small caps rallying, but largely due to a series of short squeezes in heavily shorted, doomed companies.Microsoft is another interesting valuation story, up 36% for the year and trading for roughly 33.9x earnings. MSFT is actually showing some growth, and its earnings should come in about 4.8% higher than last year. For FY 2024, analysts have revised estimates upwards by a 2-3% over the past few months. However, since the introduction of Chat GPT in late 2022, MSFT earnings estimates are actually lower. Professional analysts who follow Microsoft think the trajectory of their earnings is flat or slightly improved by its AI investments, while retail traders expect the moon on a silver platter. Why might this be?For one, Microsoft paid $10 billion for half of OpenAI (they don't own the whole thing, contrary to what many traders might think).Second, tech companies have been subject to a series of sneaky corporate tax hikes starting in January of this year.Third, interest rates have gone up markedly, meaning that companies will eventually have to replace their dirt-cheap corporate debt from the ZIRP years with expensive debt. Microsoft isn't a big offender with ramping up borrowing, but a lot of Big Tech companies are. MSFT isn't as bad as the others, but 33.9x is a high multiple compared to even some of the more optimistic analysts.Outside of the blue chips and into the second tier of the more aggressive growers, things get dicier. Amazon is roughly breaking even while facing steep increases in interest costs on corporate debt. Additionally, the company bears the full brunt of inflation with a large workforce and massive capital expenditure needs. As such, Amazon is seeing a steady deterioration in earnings estimates. To continue to grow, the company will have to issue new debt at much higher interest rates than they've done so far, further pressuring profitability. Tesla trades for 70x projected earnings, and earnings estimates have been relentlessly revised downward as the company finds itself locked in a price war with competitors across the globe. How is Tesla going to grow earnings when they're forced to cut prices to maintain growth? Tesla could be the second best-selling automaker in the world but the stock could fall 80-90% from here due to competition. With Nvidia, one looks at the valuation and then looks at the financial statements and wonders if they're even connected at all. This small group of stocks, with these middling fundamentals, is driving the entire market. Without them, the index would be flat or down.AI is great, but it's been around for much longer than you think. I worked on a corporate AI project in 2020: using an AI chatbot to help downsize a call center. As early as 2016, companies were pitching AI-generated content to publishers. AI likely will be able to help some companies improve their margins, but the data is clearly showing that its effect on the economy is being outweighed by much larger macro factors like interest rates, taxes, and even the opioid crisis. You should expect incremental productivity improvements from AI, but don't pay 150x earnings to hucksters for them!And if the boldest hype about AI is true, then you probably don't have to worry about losing purchasing power because of it. If tech companies truly decimate their highly paid labor forces, then it will pull a massive amount of demand out of the economy as hundreds of thousands of six-figure tech earners find themselves out of a job, while the shareholders who benefit are likely to simply sit on the money rather than spend it.Analysts Priced A 2023 Recession And A 2024 Earnings BoomFor their part, analysts had expected a mild recession in early 2023, followed by a robust recovery in earnings in late 2023 and 2024. However, despite subtle signs of weakening, the business cycle has yet to fully turn. The Fed had been expected to start cutting interest rates now, and instead, they're not even done hiking. That means that the robust earnings recovery in 2024 coming off the business cycle trough is likely not going to happen. Earnings estimates have perked up in the past few weeks, but the hidden driver there is the recent weakness in the US dollar, which disproportionately helped Big Tech. Should the global economy weaken, this could catch investors offside if the dollar strengthens again, as it typically does in times of global recession.US/International Revenue Breakdown (FactSet)These are the current analyst consensus estimates for 2023 earnings. Note the big recovery expected starting in Q3.2023 S&P 500 Earnings Estimates (FactSet)And these are the consensus estimates for 2024.2024 S&P 500 Earnings Estimates (FactSet)Estimates are coming down. It's normal for future earnings estimates to be overly optimistic, but what it does mean is that stocks are quite expensive. If you take the earnings estimates for 2023 at face value, then stocks are trading for roughly 19.5x earnings. If you're more skeptical about how these earnings tend to be revised down, then stocks are trading for 22x earnings or more.S&P 500 Earnings Estimates vs. Actuals (Yardeni Research)These valuations all are priced against the most important number in finance, which is the rate on cash. Cash currently pays about 5.2%, which means that you officially can get more return by parking your money in cash than you can by investing in the premier businesses in America. However, after 10+ years of no alternative to stocks, investors now have a clear alternative in cash. Additionally, should stocks fall sharply in the future, you can switch back into stocks at a moment's notice and buy from panicked/distressed sellers. With the Fed hiking more, your return from cash is not only the 5.5% or more that you'll earn but also the optionality you gain by getting what's essentially a free option to buy stocks after a correction/crash.Why Stocks Often Rally When The Economy Starts To WeakenHistorically, it's actually typical for stocks to surge as the yield curve inverts. This is because investors tend to be shortsighted and think that Fed pivots are the key to profit. However, this tends to end poorly, as yield curve inversions tend to foretell economic pain ahead. Bond investors see the pain in the economy coming 12+ months out, while stock bulls tend to react far more to changes in sentiment and current news.Stock Returns After Inverted Yield Curve (Leuthold via Bloomberg)This data shows that on average, stocks tend to rally anywhere 13% on average in the 6 months after the yield curve fully inverts. However, the final low isn't reached until over a year later on average.If this rally plays out like historical rallies facing shaky economic fundamentals and a deeply inverted yield curve, stocks might fall 35% from here to 2800, finally bottoming sometime in 2024. Due to how high valuations are currently and how constrained fiscal policy is by high debt levels, this may be conservative. Economic expansions tend to be associated with quiet changes. Similarly, unemployment rises like a rocket but falls like a feather.Data by YChartsBottom LineStocks crossed the threshold for a bull market, but it doesn't change the reality on the ground. The Fed is likely to keep hiking interest rates to balance the economy, and corporate profits should continue to slowly fall. Markets have an amazing capacity to do crazy things, but there's only so far that things can stretch. Far from being an unstoppable surge driven by fundamentals, this year's bull market looks increasingly driven by speculation, not by underlying corporate fundamentals. If they believe the business cycle has been legislated out of existence then investors can pile in here all they want. However, if history is any guide, they're likely to be disappointed with their results.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":106410098,"gmtCreate":1686607830999,"gmtModify":1686607837465,"authorId":4101532856378560,"author":{"id":4101532856378560,"idStr":"4101532856378560","authorId":4101532856378560,"name":"SG 88","avatar":"https://static.tigerbbs.com/94bec1957162ce71366820223786c2fc","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":186390602235936,"type":1,"supId":0,"prevId":0,"content":"interesting","text":"interesting","html":"interesting"},{"id":106410082,"gmtCreate":1686607541621,"gmtModify":1686607547840,"authorId":4098134382335150,"author":{"id":4098134382335150,"idStr":"4098134382335150","authorId":4098134382335150,"name":"Thomas8738","avatar":"https://static.tigerbbs.com/225c2a2e6bb8b0346814366d562c99fc","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":186390602235936,"type":1,"supId":0,"prevId":0,"content":"<u>ok</u>","text":"<u>ok</u>","html":"<u>ok</u>"},{"id":106410062,"gmtCreate":1686607341482,"gmtModify":1686607347723,"authorId":4093791271983640,"author":{"id":4093791271983640,"idStr":"4093791271983640","authorId":4093791271983640,"name":"kimkim51","avatar":"https://static.tigerbbs.com/e82c07a9bfe934ff61da2fa4113aec28","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":186390602235936,"type":1,"supId":0,"prevId":0,"content":"<u>ok</u>","text":"<u>ok</u>","html":"<u>ok</u>"},{"id":106410041,"gmtCreate":1686607022735,"gmtModify":1686607029058,"authorId":4096133290782650,"author":{"id":4096133290782650,"idStr":"4096133290782650","authorId":4096133290782650,"name":"helen123456","avatar":"https://static.tigerbbs.com/91913646928e2291c2184880a1eef309","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":186390602235936,"type":1,"supId":0,"prevId":0,"content":"<u>ok</u>","text":"<u>ok</u>","html":"<u>ok</u>"},{"id":106410036,"gmtCreate":1686606898693,"gmtModify":1686606904980,"authorId":3568945952613347,"author":{"id":3568945952613347,"idStr":"3568945952613347","authorId":3568945952613347,"name":"Wenyin","avatar":"https://static.tigerbbs.com/4514fca637e841ecdc7c46d694823f67","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":186390602235936,"type":1,"supId":0,"prevId":0,"content":"<span class=\"s1\">K</span>","text":"<span class=\"s1\">K</span>","html":"<span class=\"s1\">K</span>"}],"langContent":"EN"},{"id":186375113256992,"gmtCreate":1686541012010,"gmtModify":1686541017921,"author":{"id":"3583044537429562","authorId":"3583044537429562","name":"Mr Mooney","avatar":"https://community-static.tradeup.com/news/6836340f20d36afa666f6d8d4b0a929d","vip":1,"crmLevel":5,"crmLevelSwitch":0,"authorIdStr":"3583044537429562","idStr":"3583044537429562"},"htmlText":"# Interest rate is high&nbsp; # Profit margin are down for future. # Inflatation is higher than limit. # unemployent rate is keep rising slowly # Stock price are keep moving up like rocket. # My assumption is great correction will coming soon. Invest save&nbsp;&nbsp;","listText":"# Interest rate is high&nbsp; # Profit margin are down for future. # Inflatation is higher than limit. # unemployent rate is keep rising slowly # Stock price are keep moving up like rocket. # My assumption is great correction will coming soon. Invest save&nbsp;&nbsp;","text":"# Interest rate is high # Profit margin are down for future. # Inflatation is higher than limit. # unemployent rate is keep rising slowly # Stock price are keep moving up like rocket. # My assumption is great correction will coming soon. Invest save","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":7,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/186375113256992","repostId":2342547444,"repostType":4,"repost":{"id":"2342547444","pubTimestamp":1686528068,"share":"https://ttm.financial/m/news/2342547444?lang=&edition=fundamental","pubTime":"2023-06-12 08:01","market":"us","language":"en","title":"S&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?","url":"https://stock-news.laohu8.com/highlight/detail?id=2342547444","media":"Seekingalpha","summary":"Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven't been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called \"kitchen sink\" strategy where companies or political leaders dump all the bad news at once rather than let it trickle out. I'm sure people have fun talking about a tech \"singularity\" on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple?","content":"<html><head></head><body><p>After rallying 20% off the lows in October 2022, the S&amp;P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, Microsoft (MSFT) up 36%, Nvidia (NVDA) up 170%, Tesla (TSLA) up 126%, Amazon (AMZN) up 43%, and Google (GOOG) up 37%. These performance figures leave little doubt as to whether this rally counts as a bull market. The problem, of course, is that the bull market is concentrated in only a handful of stocks, and the stocks that are leading it have enormous valuations compared to their underlying earnings. With economic signals flashing warnings signs and valuations stretched, this rally has the hallmarks of a late-stage bull run continued from the easy-money era. Moreover, there are some fundamental signs that the bull run may soon run out of steam.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/8c471faae90db5f03960471ca6067337\" tg-width=\"635\" tg-height=\"417\"/></p><p>Data by YCharts</p><h2>I&#39;m Not Comfortable With Current Mega-Cap Valuations, And You Shouldn&#39;t Be Either</h2><p>For example, Apple is up 44% YTD and trades for 30.3x earnings, but most analysts are shockingly revising its earnings estimates downward! Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven&#39;t been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called &#34;kitchen sink&#34; strategy where companies or political leaders dump all the bad news at once rather than let it trickle out.</p><p>I&#39;m sure people have fun talking about a tech &#34;singularity&#34; on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple? Because it&#39;s about 8% of the S&amp;P 500&#39;s market cap, while representing a much smaller share of the index&#39;s profit. Together, the top 10 holdings in the S&amp;P 500 make up over 30% of the index. Historically this level of concentration of risk is a red flag. Another issue is lack of breadth, which has gotten superficially better with small caps rallying, but largely due to a series of short squeezes in heavily shorted, doomed companies.</p><p>Microsoft is another interesting valuation story, up 36% for the year and trading for roughly 33.9x earnings. MSFT is actually showing some growth, and its earnings should come in about 4.8% higher than last year. For FY 2024, analysts have revised estimates upwards by a 2-3% over the past few months. However, since the introduction of Chat GPT in late 2022, MSFT earnings estimates are actually lower. Professional analysts who follow Microsoft think the trajectory of their earnings is flat or slightly improved by its AI investments, while retail traders expect the moon on a silver platter. Why might this be?</p><ul><li><p>For one, Microsoft paid $10 billion for half of OpenAI (they don&#39;t own the whole thing, contrary to what many traders might think).</p></li><li><p>Second, tech companies have been subject to a series of sneaky corporate tax hikes starting in January of this year.</p></li><li><p>Third, interest rates have gone up markedly, meaning that companies will eventually have to replace their dirt-cheap corporate debt from the ZIRP years with expensive debt. Microsoft isn&#39;t a big offender with ramping up borrowing, but a lot of Big Tech companies are. MSFT isn&#39;t as bad as the others, but 33.9x is a high multiple compared to even some of the more optimistic analysts.</p></li></ul><p>Outside of the blue chips and into the second tier of the more aggressive growers, things get dicier. Amazon is roughly breaking even while facing steep increases in interest costs on corporate debt. Additionally, the company bears the full brunt of inflation with a large workforce and massive capital expenditure needs. As such, Amazon is seeing a steady deterioration in earnings estimates. To continue to grow, the company will have to issue new debt at much higher interest rates than they&#39;ve done so far, further pressuring profitability. Tesla trades for 70x projected earnings, and earnings estimates have been relentlessly revised downward as the company finds itself locked in a price war with competitors across the globe. How is Tesla going to grow earnings when they&#39;re forced to cut prices to maintain growth? Tesla could be the second best-selling automaker in the world but the stock could fall 80-90% from here due to competition. With Nvidia, one looks at the valuation and then looks at the financial statements and wonders if they&#39;re even connected at all. This small group of stocks, with these middling fundamentals, is driving the entire market. Without them, the index would be flat or down.</p><p>AI is great, but it&#39;s been around for much longer than you think. I worked on a corporate AI project in 2020: using an AI chatbot to help downsize a call center. As early as 2016, companies were pitching AI-generated content to publishers. AI likely will be able to help some companies improve their margins, but the data is clearly showing that its effect on the economy is being outweighed by much larger macro factors like interest rates, taxes, and even the opioid crisis. You should expect incremental productivity improvements from AI, but don&#39;t pay 150x earnings to hucksters for them!</p><p>And if the boldest hype about AI is true, then you probably don&#39;t have to worry about losing purchasing power because of it. If tech companies truly decimate their highly paid labor forces, then it will pull a massive amount of demand out of the economy as hundreds of thousands of six-figure tech earners find themselves out of a job, while the shareholders who benefit are likely to simply sit on the money rather than spend it.</p><h2>Analysts Priced A 2023 Recession And A 2024 Earnings Boom</h2><p>For their part, analysts had expected a mild recession in early 2023, followed by a robust recovery in earnings in late 2023 and 2024. However, despite subtle signs of weakening, the business cycle has yet to fully turn. The Fed had been expected to start cutting interest rates now, and instead, they&#39;re not even done hiking. That means that the robust earnings recovery in 2024 coming off the business cycle trough is likely not going to happen. Earnings estimates have perked up in the past few weeks, but the hidden driver there is the recent weakness in the US dollar, which disproportionately helped Big Tech. Should the global economy weaken, this could catch investors offside if the dollar strengthens again, as it typically does in times of global recession.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/0091af902f7808c1f95a3e50679b3d5f\" tg-width=\"640\" tg-height=\"366\"/></p><p>US/International Revenue Breakdown (FactSet)</p><p>These are the current analyst consensus estimates for 2023 earnings. Note the big recovery expected starting in Q3.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/af806efe3f161e89b097c836d2d98093\" tg-width=\"640\" tg-height=\"372\"/></p><p>2023 S&amp;P 500 Earnings Estimates (FactSet)</p><p>And these are the consensus estimates for 2024.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/6376dfff185d27c6f82b84f619370556\" tg-width=\"640\" tg-height=\"361\"/></p><p>2024 S&amp;P 500 Earnings Estimates (FactSet)</p><p>Estimates are coming down. It&#39;s normal for future earnings estimates to be overly optimistic, but what it does mean is that stocks are quite expensive. If you take the earnings estimates for 2023 at face value, then stocks are trading for roughly 19.5x earnings. If you&#39;re more skeptical about how these earnings tend to be revised down, then stocks are trading for 22x earnings or more.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/0f786fb4efe9cfe6e16084b185d35c20\" tg-width=\"640\" tg-height=\"338\"/></p><p>S&amp;P 500 Earnings Estimates vs. Actuals (Yardeni Research)</p><p>These valuations all are priced against the most important number in finance, which is the rate on cash. Cash currently pays about 5.2%, which means that you officially can get more return by parking your money in cash than you can by investing in the premier businesses in America. However, after 10+ years of no alternative to stocks, investors now have a clear alternative in cash. Additionally, should stocks fall sharply in the future, you can switch back into stocks at a moment&#39;s notice and buy from panicked/distressed sellers. With the Fed hiking more, your return from cash is not only the 5.5% or more that you&#39;ll earn but also the optionality you gain by getting what&#39;s essentially a free option to buy stocks after a correction/crash.</p><h2>Why Stocks Often Rally When The Economy Starts To Weaken</h2><p>Historically, it&#39;s actually typical for stocks to surge as the yield curve inverts. This is because investors tend to be shortsighted and think that Fed pivots are the key to profit. However, this tends to end poorly, as yield curve inversions tend to foretell economic pain ahead. Bond investors see the pain in the economy coming 12+ months out, while stock bulls tend to react far more to changes in sentiment and current news.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/06fdffa99bde7cefca7d7f2edcb37a27\" tg-width=\"640\" tg-height=\"279\"/></p><p>Stock Returns After Inverted Yield Curve (Leuthold via Bloomberg)</p><p>This data shows that on average, stocks tend to rally anywhere 13% on average in the 6 months after the yield curve fully inverts. However, the final low isn&#39;t reached until over a year later on average.</p><p>If this rally plays out like historical rallies facing shaky economic fundamentals and a deeply inverted yield curve, stocks might fall 35% from here to 2800, finally bottoming sometime in 2024. Due to how high valuations are currently and how constrained fiscal policy is by high debt levels, this may be conservative. Economic expansions tend to be associated with quiet changes. Similarly, unemployment rises like a rocket but falls like a feather.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/ab6e6077def6ddeb2a82df24e65bc6a1\" tg-width=\"635\" tg-height=\"417\"/></p><p>Data by YCharts</p><h2>Bottom Line</h2><p>Stocks crossed the threshold for a bull market, but it doesn&#39;t change the reality on the ground. The Fed is likely to keep hiking interest rates to balance the economy, and corporate profits should continue to slowly fall. Markets have an amazing capacity to do crazy things, but there&#39;s only so far that things can stretch. Far from being an unstoppable surge driven by fundamentals, this year&#39;s bull market looks increasingly driven by speculation, not by underlying corporate fundamentals. If they believe the business cycle has been legislated out of existence then investors can pile in here all they want. However, if history is any guide, they&#39;re likely to be disappointed with their results.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>S&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nS&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-06-12 08:01 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards><strong>Seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>After rallying 20% off the lows in October 2022, the S&P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{".SPX":"S&P 500 Index",".IXIC":"NASDAQ Composite",".DJI":"道琼斯"},"source_url":"https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2342547444","content_text":"After rallying 20% off the lows in October 2022, the S&P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, Microsoft (MSFT) up 36%, Nvidia (NVDA) up 170%, Tesla (TSLA) up 126%, Amazon (AMZN) up 43%, and Google (GOOG) up 37%. These performance figures leave little doubt as to whether this rally counts as a bull market. The problem, of course, is that the bull market is concentrated in only a handful of stocks, and the stocks that are leading it have enormous valuations compared to their underlying earnings. With economic signals flashing warnings signs and valuations stretched, this rally has the hallmarks of a late-stage bull run continued from the easy-money era. Moreover, there are some fundamental signs that the bull run may soon run out of steam.Data by YChartsI'm Not Comfortable With Current Mega-Cap Valuations, And You Shouldn't Be EitherFor example, Apple is up 44% YTD and trades for 30.3x earnings, but most analysts are shockingly revising its earnings estimates downward! Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven't been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called \"kitchen sink\" strategy where companies or political leaders dump all the bad news at once rather than let it trickle out.I'm sure people have fun talking about a tech \"singularity\" on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple? Because it's about 8% of the S&P 500's market cap, while representing a much smaller share of the index's profit. Together, the top 10 holdings in the S&P 500 make up over 30% of the index. Historically this level of concentration of risk is a red flag. Another issue is lack of breadth, which has gotten superficially better with small caps rallying, but largely due to a series of short squeezes in heavily shorted, doomed companies.Microsoft is another interesting valuation story, up 36% for the year and trading for roughly 33.9x earnings. MSFT is actually showing some growth, and its earnings should come in about 4.8% higher than last year. For FY 2024, analysts have revised estimates upwards by a 2-3% over the past few months. However, since the introduction of Chat GPT in late 2022, MSFT earnings estimates are actually lower. Professional analysts who follow Microsoft think the trajectory of their earnings is flat or slightly improved by its AI investments, while retail traders expect the moon on a silver platter. Why might this be?For one, Microsoft paid $10 billion for half of OpenAI (they don't own the whole thing, contrary to what many traders might think).Second, tech companies have been subject to a series of sneaky corporate tax hikes starting in January of this year.Third, interest rates have gone up markedly, meaning that companies will eventually have to replace their dirt-cheap corporate debt from the ZIRP years with expensive debt. Microsoft isn't a big offender with ramping up borrowing, but a lot of Big Tech companies are. MSFT isn't as bad as the others, but 33.9x is a high multiple compared to even some of the more optimistic analysts.Outside of the blue chips and into the second tier of the more aggressive growers, things get dicier. Amazon is roughly breaking even while facing steep increases in interest costs on corporate debt. Additionally, the company bears the full brunt of inflation with a large workforce and massive capital expenditure needs. As such, Amazon is seeing a steady deterioration in earnings estimates. To continue to grow, the company will have to issue new debt at much higher interest rates than they've done so far, further pressuring profitability. Tesla trades for 70x projected earnings, and earnings estimates have been relentlessly revised downward as the company finds itself locked in a price war with competitors across the globe. How is Tesla going to grow earnings when they're forced to cut prices to maintain growth? Tesla could be the second best-selling automaker in the world but the stock could fall 80-90% from here due to competition. With Nvidia, one looks at the valuation and then looks at the financial statements and wonders if they're even connected at all. This small group of stocks, with these middling fundamentals, is driving the entire market. Without them, the index would be flat or down.AI is great, but it's been around for much longer than you think. I worked on a corporate AI project in 2020: using an AI chatbot to help downsize a call center. As early as 2016, companies were pitching AI-generated content to publishers. AI likely will be able to help some companies improve their margins, but the data is clearly showing that its effect on the economy is being outweighed by much larger macro factors like interest rates, taxes, and even the opioid crisis. You should expect incremental productivity improvements from AI, but don't pay 150x earnings to hucksters for them!And if the boldest hype about AI is true, then you probably don't have to worry about losing purchasing power because of it. If tech companies truly decimate their highly paid labor forces, then it will pull a massive amount of demand out of the economy as hundreds of thousands of six-figure tech earners find themselves out of a job, while the shareholders who benefit are likely to simply sit on the money rather than spend it.Analysts Priced A 2023 Recession And A 2024 Earnings BoomFor their part, analysts had expected a mild recession in early 2023, followed by a robust recovery in earnings in late 2023 and 2024. However, despite subtle signs of weakening, the business cycle has yet to fully turn. The Fed had been expected to start cutting interest rates now, and instead, they're not even done hiking. That means that the robust earnings recovery in 2024 coming off the business cycle trough is likely not going to happen. Earnings estimates have perked up in the past few weeks, but the hidden driver there is the recent weakness in the US dollar, which disproportionately helped Big Tech. Should the global economy weaken, this could catch investors offside if the dollar strengthens again, as it typically does in times of global recession.US/International Revenue Breakdown (FactSet)These are the current analyst consensus estimates for 2023 earnings. Note the big recovery expected starting in Q3.2023 S&P 500 Earnings Estimates (FactSet)And these are the consensus estimates for 2024.2024 S&P 500 Earnings Estimates (FactSet)Estimates are coming down. It's normal for future earnings estimates to be overly optimistic, but what it does mean is that stocks are quite expensive. If you take the earnings estimates for 2023 at face value, then stocks are trading for roughly 19.5x earnings. If you're more skeptical about how these earnings tend to be revised down, then stocks are trading for 22x earnings or more.S&P 500 Earnings Estimates vs. Actuals (Yardeni Research)These valuations all are priced against the most important number in finance, which is the rate on cash. Cash currently pays about 5.2%, which means that you officially can get more return by parking your money in cash than you can by investing in the premier businesses in America. However, after 10+ years of no alternative to stocks, investors now have a clear alternative in cash. Additionally, should stocks fall sharply in the future, you can switch back into stocks at a moment's notice and buy from panicked/distressed sellers. With the Fed hiking more, your return from cash is not only the 5.5% or more that you'll earn but also the optionality you gain by getting what's essentially a free option to buy stocks after a correction/crash.Why Stocks Often Rally When The Economy Starts To WeakenHistorically, it's actually typical for stocks to surge as the yield curve inverts. This is because investors tend to be shortsighted and think that Fed pivots are the key to profit. However, this tends to end poorly, as yield curve inversions tend to foretell economic pain ahead. Bond investors see the pain in the economy coming 12+ months out, while stock bulls tend to react far more to changes in sentiment and current news.Stock Returns After Inverted Yield Curve (Leuthold via Bloomberg)This data shows that on average, stocks tend to rally anywhere 13% on average in the 6 months after the yield curve fully inverts. However, the final low isn't reached until over a year later on average.If this rally plays out like historical rallies facing shaky economic fundamentals and a deeply inverted yield curve, stocks might fall 35% from here to 2800, finally bottoming sometime in 2024. Due to how high valuations are currently and how constrained fiscal policy is by high debt levels, this may be conservative. Economic expansions tend to be associated with quiet changes. Similarly, unemployment rises like a rocket but falls like a feather.Data by YChartsBottom LineStocks crossed the threshold for a bull market, but it doesn't change the reality on the ground. The Fed is likely to keep hiking interest rates to balance the economy, and corporate profits should continue to slowly fall. Markets have an amazing capacity to do crazy things, but there's only so far that things can stretch. Far from being an unstoppable surge driven by fundamentals, this year's bull market looks increasingly driven by speculation, not by underlying corporate fundamentals. If they believe the business cycle has been legislated out of existence then investors can pile in here all they want. However, if history is any guide, they're likely to be disappointed with their results.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":186333464932456,"gmtCreate":1686530848394,"gmtModify":1686530853623,"author":{"id":"3576283399326455","authorId":"3576283399326455","name":"davidsoh","avatar":"https://community-static.tradeup.com/news/5b156961bf473077f33ef1426426000a","vip":1,"hat":"https://static.tigerbbs.com/b073a07f77dbe6b3bec6b12311fde6bd","crmLevel":2,"crmLevelSwitch":0,"authorIdStr":"3576283399326455","idStr":"3576283399326455"},"htmlText":"I don think is a Bull run ! Is bcos they added Tesla into the s&amp;p !! Becareful guys... Is just a game !!","listText":"I don think is a Bull run ! Is bcos they added Tesla into the s&amp;p !! Becareful guys... Is just a game !!","text":"I don think is a Bull run ! Is bcos they added Tesla into the s&p !! Becareful guys... Is just a game !!","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":9,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/186333464932456","repostId":2342547444,"repostType":2,"repost":{"id":"2342547444","pubTimestamp":1686528068,"share":"https://ttm.financial/m/news/2342547444?lang=&edition=fundamental","pubTime":"2023-06-12 08:01","market":"us","language":"en","title":"S&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?","url":"https://stock-news.laohu8.com/highlight/detail?id=2342547444","media":"Seekingalpha","summary":"Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven't been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called \"kitchen sink\" strategy where companies or political leaders dump all the bad news at once rather than let it trickle out. I'm sure people have fun talking about a tech \"singularity\" on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple?","content":"<html><head></head><body><p>After rallying 20% off the lows in October 2022, the S&amp;P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, Microsoft (MSFT) up 36%, Nvidia (NVDA) up 170%, Tesla (TSLA) up 126%, Amazon (AMZN) up 43%, and Google (GOOG) up 37%. These performance figures leave little doubt as to whether this rally counts as a bull market. The problem, of course, is that the bull market is concentrated in only a handful of stocks, and the stocks that are leading it have enormous valuations compared to their underlying earnings. With economic signals flashing warnings signs and valuations stretched, this rally has the hallmarks of a late-stage bull run continued from the easy-money era. Moreover, there are some fundamental signs that the bull run may soon run out of steam.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/8c471faae90db5f03960471ca6067337\" tg-width=\"635\" tg-height=\"417\"/></p><p>Data by YCharts</p><h2>I&#39;m Not Comfortable With Current Mega-Cap Valuations, And You Shouldn&#39;t Be Either</h2><p>For example, Apple is up 44% YTD and trades for 30.3x earnings, but most analysts are shockingly revising its earnings estimates downward! Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven&#39;t been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called &#34;kitchen sink&#34; strategy where companies or political leaders dump all the bad news at once rather than let it trickle out.</p><p>I&#39;m sure people have fun talking about a tech &#34;singularity&#34; on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple? Because it&#39;s about 8% of the S&amp;P 500&#39;s market cap, while representing a much smaller share of the index&#39;s profit. Together, the top 10 holdings in the S&amp;P 500 make up over 30% of the index. Historically this level of concentration of risk is a red flag. Another issue is lack of breadth, which has gotten superficially better with small caps rallying, but largely due to a series of short squeezes in heavily shorted, doomed companies.</p><p>Microsoft is another interesting valuation story, up 36% for the year and trading for roughly 33.9x earnings. MSFT is actually showing some growth, and its earnings should come in about 4.8% higher than last year. For FY 2024, analysts have revised estimates upwards by a 2-3% over the past few months. However, since the introduction of Chat GPT in late 2022, MSFT earnings estimates are actually lower. Professional analysts who follow Microsoft think the trajectory of their earnings is flat or slightly improved by its AI investments, while retail traders expect the moon on a silver platter. Why might this be?</p><ul><li><p>For one, Microsoft paid $10 billion for half of OpenAI (they don&#39;t own the whole thing, contrary to what many traders might think).</p></li><li><p>Second, tech companies have been subject to a series of sneaky corporate tax hikes starting in January of this year.</p></li><li><p>Third, interest rates have gone up markedly, meaning that companies will eventually have to replace their dirt-cheap corporate debt from the ZIRP years with expensive debt. Microsoft isn&#39;t a big offender with ramping up borrowing, but a lot of Big Tech companies are. MSFT isn&#39;t as bad as the others, but 33.9x is a high multiple compared to even some of the more optimistic analysts.</p></li></ul><p>Outside of the blue chips and into the second tier of the more aggressive growers, things get dicier. Amazon is roughly breaking even while facing steep increases in interest costs on corporate debt. Additionally, the company bears the full brunt of inflation with a large workforce and massive capital expenditure needs. As such, Amazon is seeing a steady deterioration in earnings estimates. To continue to grow, the company will have to issue new debt at much higher interest rates than they&#39;ve done so far, further pressuring profitability. Tesla trades for 70x projected earnings, and earnings estimates have been relentlessly revised downward as the company finds itself locked in a price war with competitors across the globe. How is Tesla going to grow earnings when they&#39;re forced to cut prices to maintain growth? Tesla could be the second best-selling automaker in the world but the stock could fall 80-90% from here due to competition. With Nvidia, one looks at the valuation and then looks at the financial statements and wonders if they&#39;re even connected at all. This small group of stocks, with these middling fundamentals, is driving the entire market. Without them, the index would be flat or down.</p><p>AI is great, but it&#39;s been around for much longer than you think. I worked on a corporate AI project in 2020: using an AI chatbot to help downsize a call center. As early as 2016, companies were pitching AI-generated content to publishers. AI likely will be able to help some companies improve their margins, but the data is clearly showing that its effect on the economy is being outweighed by much larger macro factors like interest rates, taxes, and even the opioid crisis. You should expect incremental productivity improvements from AI, but don&#39;t pay 150x earnings to hucksters for them!</p><p>And if the boldest hype about AI is true, then you probably don&#39;t have to worry about losing purchasing power because of it. If tech companies truly decimate their highly paid labor forces, then it will pull a massive amount of demand out of the economy as hundreds of thousands of six-figure tech earners find themselves out of a job, while the shareholders who benefit are likely to simply sit on the money rather than spend it.</p><h2>Analysts Priced A 2023 Recession And A 2024 Earnings Boom</h2><p>For their part, analysts had expected a mild recession in early 2023, followed by a robust recovery in earnings in late 2023 and 2024. However, despite subtle signs of weakening, the business cycle has yet to fully turn. The Fed had been expected to start cutting interest rates now, and instead, they&#39;re not even done hiking. That means that the robust earnings recovery in 2024 coming off the business cycle trough is likely not going to happen. Earnings estimates have perked up in the past few weeks, but the hidden driver there is the recent weakness in the US dollar, which disproportionately helped Big Tech. Should the global economy weaken, this could catch investors offside if the dollar strengthens again, as it typically does in times of global recession.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/0091af902f7808c1f95a3e50679b3d5f\" tg-width=\"640\" tg-height=\"366\"/></p><p>US/International Revenue Breakdown (FactSet)</p><p>These are the current analyst consensus estimates for 2023 earnings. Note the big recovery expected starting in Q3.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/af806efe3f161e89b097c836d2d98093\" tg-width=\"640\" tg-height=\"372\"/></p><p>2023 S&amp;P 500 Earnings Estimates (FactSet)</p><p>And these are the consensus estimates for 2024.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/6376dfff185d27c6f82b84f619370556\" tg-width=\"640\" tg-height=\"361\"/></p><p>2024 S&amp;P 500 Earnings Estimates (FactSet)</p><p>Estimates are coming down. It&#39;s normal for future earnings estimates to be overly optimistic, but what it does mean is that stocks are quite expensive. If you take the earnings estimates for 2023 at face value, then stocks are trading for roughly 19.5x earnings. If you&#39;re more skeptical about how these earnings tend to be revised down, then stocks are trading for 22x earnings or more.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/0f786fb4efe9cfe6e16084b185d35c20\" tg-width=\"640\" tg-height=\"338\"/></p><p>S&amp;P 500 Earnings Estimates vs. Actuals (Yardeni Research)</p><p>These valuations all are priced against the most important number in finance, which is the rate on cash. Cash currently pays about 5.2%, which means that you officially can get more return by parking your money in cash than you can by investing in the premier businesses in America. However, after 10+ years of no alternative to stocks, investors now have a clear alternative in cash. Additionally, should stocks fall sharply in the future, you can switch back into stocks at a moment&#39;s notice and buy from panicked/distressed sellers. With the Fed hiking more, your return from cash is not only the 5.5% or more that you&#39;ll earn but also the optionality you gain by getting what&#39;s essentially a free option to buy stocks after a correction/crash.</p><h2>Why Stocks Often Rally When The Economy Starts To Weaken</h2><p>Historically, it&#39;s actually typical for stocks to surge as the yield curve inverts. This is because investors tend to be shortsighted and think that Fed pivots are the key to profit. However, this tends to end poorly, as yield curve inversions tend to foretell economic pain ahead. Bond investors see the pain in the economy coming 12+ months out, while stock bulls tend to react far more to changes in sentiment and current news.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/06fdffa99bde7cefca7d7f2edcb37a27\" tg-width=\"640\" tg-height=\"279\"/></p><p>Stock Returns After Inverted Yield Curve (Leuthold via Bloomberg)</p><p>This data shows that on average, stocks tend to rally anywhere 13% on average in the 6 months after the yield curve fully inverts. However, the final low isn&#39;t reached until over a year later on average.</p><p>If this rally plays out like historical rallies facing shaky economic fundamentals and a deeply inverted yield curve, stocks might fall 35% from here to 2800, finally bottoming sometime in 2024. Due to how high valuations are currently and how constrained fiscal policy is by high debt levels, this may be conservative. Economic expansions tend to be associated with quiet changes. Similarly, unemployment rises like a rocket but falls like a feather.</p><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/ab6e6077def6ddeb2a82df24e65bc6a1\" tg-width=\"635\" tg-height=\"417\"/></p><p>Data by YCharts</p><h2>Bottom Line</h2><p>Stocks crossed the threshold for a bull market, but it doesn&#39;t change the reality on the ground. The Fed is likely to keep hiking interest rates to balance the economy, and corporate profits should continue to slowly fall. Markets have an amazing capacity to do crazy things, but there&#39;s only so far that things can stretch. Far from being an unstoppable surge driven by fundamentals, this year&#39;s bull market looks increasingly driven by speculation, not by underlying corporate fundamentals. If they believe the business cycle has been legislated out of existence then investors can pile in here all they want. However, if history is any guide, they&#39;re likely to be disappointed with their results.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>S&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nS&P 500 Officially Enters Bull Market: Unstoppable Surge Or House Of Cards?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-06-12 08:01 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards><strong>Seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>After rallying 20% off the lows in October 2022, the S&P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{".SPX":"S&P 500 Index",".IXIC":"NASDAQ Composite",".DJI":"道琼斯"},"source_url":"https://seekingalpha.com/article/4610722-s-and-p-500-officially-enters-bull-market-unstoppable-surge-or-house-of-cards","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2342547444","content_text":"After rallying 20% off the lows in October 2022, the S&P 500 (SPY) has crossed the most commonly-defined threshold of a bull market. The old leaders are the new leaders, with Apple (AAPL) up 44% YTD, Microsoft (MSFT) up 36%, Nvidia (NVDA) up 170%, Tesla (TSLA) up 126%, Amazon (AMZN) up 43%, and Google (GOOG) up 37%. These performance figures leave little doubt as to whether this rally counts as a bull market. The problem, of course, is that the bull market is concentrated in only a handful of stocks, and the stocks that are leading it have enormous valuations compared to their underlying earnings. With economic signals flashing warnings signs and valuations stretched, this rally has the hallmarks of a late-stage bull run continued from the easy-money era. Moreover, there are some fundamental signs that the bull run may soon run out of steam.Data by YChartsI'm Not Comfortable With Current Mega-Cap Valuations, And You Shouldn't Be EitherFor example, Apple is up 44% YTD and trades for 30.3x earnings, but most analysts are shockingly revising its earnings estimates downward! Apple historically tends to sandbag guidance to give themselves room to beat expectations, but lately, they haven't been able to deliver consistent earnings surprises. This is part of a broader trend that is worrying analysts, which is that changes in accruals are signaling that companies are potentially overstating reported earnings. There are a lot of incentives to do this with executives paid largely in stock. This tends to be corrected with a so-called \"kitchen sink\" strategy where companies or political leaders dump all the bad news at once rather than let it trickle out.I'm sure people have fun talking about a tech \"singularity\" on Reddit, but -2.5% EPS year-over-year is not exactly a black hole of endless profit growth. Why care about Apple? Because it's about 8% of the S&P 500's market cap, while representing a much smaller share of the index's profit. Together, the top 10 holdings in the S&P 500 make up over 30% of the index. Historically this level of concentration of risk is a red flag. Another issue is lack of breadth, which has gotten superficially better with small caps rallying, but largely due to a series of short squeezes in heavily shorted, doomed companies.Microsoft is another interesting valuation story, up 36% for the year and trading for roughly 33.9x earnings. MSFT is actually showing some growth, and its earnings should come in about 4.8% higher than last year. For FY 2024, analysts have revised estimates upwards by a 2-3% over the past few months. However, since the introduction of Chat GPT in late 2022, MSFT earnings estimates are actually lower. Professional analysts who follow Microsoft think the trajectory of their earnings is flat or slightly improved by its AI investments, while retail traders expect the moon on a silver platter. Why might this be?For one, Microsoft paid $10 billion for half of OpenAI (they don't own the whole thing, contrary to what many traders might think).Second, tech companies have been subject to a series of sneaky corporate tax hikes starting in January of this year.Third, interest rates have gone up markedly, meaning that companies will eventually have to replace their dirt-cheap corporate debt from the ZIRP years with expensive debt. Microsoft isn't a big offender with ramping up borrowing, but a lot of Big Tech companies are. MSFT isn't as bad as the others, but 33.9x is a high multiple compared to even some of the more optimistic analysts.Outside of the blue chips and into the second tier of the more aggressive growers, things get dicier. Amazon is roughly breaking even while facing steep increases in interest costs on corporate debt. Additionally, the company bears the full brunt of inflation with a large workforce and massive capital expenditure needs. As such, Amazon is seeing a steady deterioration in earnings estimates. To continue to grow, the company will have to issue new debt at much higher interest rates than they've done so far, further pressuring profitability. Tesla trades for 70x projected earnings, and earnings estimates have been relentlessly revised downward as the company finds itself locked in a price war with competitors across the globe. How is Tesla going to grow earnings when they're forced to cut prices to maintain growth? Tesla could be the second best-selling automaker in the world but the stock could fall 80-90% from here due to competition. With Nvidia, one looks at the valuation and then looks at the financial statements and wonders if they're even connected at all. This small group of stocks, with these middling fundamentals, is driving the entire market. Without them, the index would be flat or down.AI is great, but it's been around for much longer than you think. I worked on a corporate AI project in 2020: using an AI chatbot to help downsize a call center. As early as 2016, companies were pitching AI-generated content to publishers. AI likely will be able to help some companies improve their margins, but the data is clearly showing that its effect on the economy is being outweighed by much larger macro factors like interest rates, taxes, and even the opioid crisis. You should expect incremental productivity improvements from AI, but don't pay 150x earnings to hucksters for them!And if the boldest hype about AI is true, then you probably don't have to worry about losing purchasing power because of it. If tech companies truly decimate their highly paid labor forces, then it will pull a massive amount of demand out of the economy as hundreds of thousands of six-figure tech earners find themselves out of a job, while the shareholders who benefit are likely to simply sit on the money rather than spend it.Analysts Priced A 2023 Recession And A 2024 Earnings BoomFor their part, analysts had expected a mild recession in early 2023, followed by a robust recovery in earnings in late 2023 and 2024. However, despite subtle signs of weakening, the business cycle has yet to fully turn. The Fed had been expected to start cutting interest rates now, and instead, they're not even done hiking. That means that the robust earnings recovery in 2024 coming off the business cycle trough is likely not going to happen. Earnings estimates have perked up in the past few weeks, but the hidden driver there is the recent weakness in the US dollar, which disproportionately helped Big Tech. Should the global economy weaken, this could catch investors offside if the dollar strengthens again, as it typically does in times of global recession.US/International Revenue Breakdown (FactSet)These are the current analyst consensus estimates for 2023 earnings. Note the big recovery expected starting in Q3.2023 S&P 500 Earnings Estimates (FactSet)And these are the consensus estimates for 2024.2024 S&P 500 Earnings Estimates (FactSet)Estimates are coming down. It's normal for future earnings estimates to be overly optimistic, but what it does mean is that stocks are quite expensive. If you take the earnings estimates for 2023 at face value, then stocks are trading for roughly 19.5x earnings. If you're more skeptical about how these earnings tend to be revised down, then stocks are trading for 22x earnings or more.S&P 500 Earnings Estimates vs. Actuals (Yardeni Research)These valuations all are priced against the most important number in finance, which is the rate on cash. Cash currently pays about 5.2%, which means that you officially can get more return by parking your money in cash than you can by investing in the premier businesses in America. However, after 10+ years of no alternative to stocks, investors now have a clear alternative in cash. Additionally, should stocks fall sharply in the future, you can switch back into stocks at a moment's notice and buy from panicked/distressed sellers. With the Fed hiking more, your return from cash is not only the 5.5% or more that you'll earn but also the optionality you gain by getting what's essentially a free option to buy stocks after a correction/crash.Why Stocks Often Rally When The Economy Starts To WeakenHistorically, it's actually typical for stocks to surge as the yield curve inverts. This is because investors tend to be shortsighted and think that Fed pivots are the key to profit. However, this tends to end poorly, as yield curve inversions tend to foretell economic pain ahead. Bond investors see the pain in the economy coming 12+ months out, while stock bulls tend to react far more to changes in sentiment and current news.Stock Returns After Inverted Yield Curve (Leuthold via Bloomberg)This data shows that on average, stocks tend to rally anywhere 13% on average in the 6 months after the yield curve fully inverts. However, the final low isn't reached until over a year later on average.If this rally plays out like historical rallies facing shaky economic fundamentals and a deeply inverted yield curve, stocks might fall 35% from here to 2800, finally bottoming sometime in 2024. Due to how high valuations are currently and how constrained fiscal policy is by high debt levels, this may be conservative. Economic expansions tend to be associated with quiet changes. Similarly, unemployment rises like a rocket but falls like a feather.Data by YChartsBottom LineStocks crossed the threshold for a bull market, but it doesn't change the reality on the ground. The Fed is likely to keep hiking interest rates to balance the economy, and corporate profits should continue to slowly fall. Markets have an amazing capacity to do crazy things, but there's only so far that things can stretch. Far from being an unstoppable surge driven by fundamentals, this year's bull market looks increasingly driven by speculation, not by underlying corporate fundamentals. If they believe the business cycle has been legislated out of existence then investors can pile in here all they want. However, if history is any guide, they're likely to be disappointed with their results.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":87,"commentSize":6,"repostSize":3,"favoriteSize":2,"likeStatus":false,"favoriteStatus":false}}