S&P 500 Valuation Soars: Is the Market’s Optimism Justified?

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The S&P 500’s P/E ratio, standing at eight times that of international stocks, raises concerns about its soaring valuation. Notably, even during the 2008 crisis and the 2001 Dot-com bubble peaks, the S&P 500 was not as expensive. The current market scenario sees the Magnificent 7 with a market cap surpassing the GDP of all countries, except China and the US. Despite forecasts predicting no first-quarter sales growth, an anticipated 6% year-over-year earnings growth hinges on stock buybacks and margin expansion. However, historical trends indicate that margin estimates tend to start high and decline, raising questions about the sustainability of the current optimism. Current estimates project a 10.9% margin, with 2024 expected to rise to 12%.

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Earnings Forecast For The S&P 500 In 2024 May Be Overly Optimistic

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World Bank Forecasts Bleak Economic Outlook: Worst Growth in 30 Years

The World Bank’s recent report paints a grim picture for the global economy, predicting the poorest half-decade growth in 30 years. Global growth is expected to slow down further in 2024 to 2.4%, marking the third consecutive year of deceleration. Although a slight increase to 2.7% is anticipated in 2025, this growth rate still falls significantly below the average of the 2010s. Geopolitical tensions, including the war in Eastern Europe and conflicts in the Middle East, are major contributing factors to this slowdown, potentially impacting energy prices, inflation, and overall economic growth. The World Bank warns of a “decade of wasted opportunity” without significant policy changes.

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