Investment firm Richard Bernstein Advisors (RBA) has stated that investors may soon have a rare opportunity to buy stocks, as corporate profits are expected to soar across various sectors of the market. RBA expressed optimism, stating that the economy is not heading towards a hard landing or recession, and that corporate profits are set to take off. Although global stocks have experienced a profits recession this year, RBA believes that earnings have reached their lowest point and will accelerate into the end of 2023 and beyond.
In the US, leading indicators for corporate profits have also bottomed out, signaling an upcoming increase in earnings. RBA predicts that S&P 500 earnings growth will rise by 10% to 15% through 2024. These positive trends are supported by a strong economy, with a nominal GDP growth rate of 8.5% in the past quarter, the highest since 2006. This economic growth is already reflected in corporate earnings, with around 130 US companies reporting at least 25% earnings growth as of October.
RBA anticipates a surge in profits across almost every area of the stock market, except for the “Magnificent Seven” companies that have experienced significant share price increases due to Wall Street’s enthusiasm for artificial intelligence. RBA believes these tech giants are now overvalued, making other investment opportunities more attractive.
The firm also highlights that other market forecasters have a bullish outlook for stocks for the remainder of the year, despite the S&P 500 experiencing three consecutive monthly losses in October. The decline has been attributed to surging bond yields and concerns about long-lasting higher interest rates. However, there are indications that equities could quickly recover from this recent correction.
Overall, RBA views the upcoming increase in corporate profits as a “once-in-a-generation” investment opportunity, with stocks poised for significant gains.
