Human nature means that there will always be people who interpret apparently good news in a negative way. As companies report their second-quarter results, the benchmark S&P 500 Index It’s expected to post its highest profit growth in two years, but some are saying that’s a bad thing because “expectations are too high” — that is, the economy can’t be that strong and investors will surely be disappointed.
Given the high potential for expectations, The right reasonsBottom-up based Revenue Forecast Bloomberg Intelligence expects S&P 500 profits to grow 9.1% year over year, while sales are expected to grow 4.4%. In an environment of robust (albeit slowing) economic growth, these numbers are hardly exaggerated. Of course, the stock market is not the economy, but since nominal gross domestic product is thought to have grown about 5.5% year over year in April-June, the sales forecast easily passes the macroeconomic smell test. Add to that the behemoths that have been driving the overall market for several quarters, including weight-loss drug maker Eli Lilly and Nvidia, which still dominates the advanced chip market amid the boom in generative artificial intelligence.
