This is a Pay Now/Grow Later market. Market valuations are approaching the upper end of the 10-year trailing average on a forward price/earnings basis as much of this year’s market advance has been driven by multiple expansions with a minor contribution from actual earnings growth.

Although analyst estimates for the S&P 500 companies have been rising since the February low levels (much of that upward revision coming from optimism over tech-driven growth spending), sell-side analysts are only projecting 0.9% growth in earnings-per-share for CY2023, but a much better year for 2024 (11.4% growth).  So, a strong recovery in earnings growth is being pushed out later with 2023 treated as a wash year.

By Benjamin M. Lavine, CFA, CAIA, RICP
Chief Investment Strategist, Freedom Advisors & Chief Investment Officer, 3D, a Freedom Advisors company