The stock market bull market may have room for further downturns.
“We’re in the early stages of a bull market and the earnings recovery story has barely begun,” Ben Laidler, head of equity strategy at Bradesco BBI, told Yahoo Finance editor-in-chief Brian Sozzi on the Opening Bid podcast (video above, listen here ).
Laidler, a former HSBC and JPMorgan executive, believes the Fed could cut interest rates twice this year, which should excite investors even more than expected strong profit growth.
Laidler argued that these factors could propel the stock price up by at least 100% over the next five years.
“If the economy does well and we see some multiple expansion, earnings could easily grow at 15% compound annually, which I think is justified by low interest rates,” he said.
The current stock bull market is believed to have begun in October 2022 when the S&P 500 (^GSPC) hit its most recent low. Since then, the index has rallied an astounding 55%. The index has risen nearly 17% so far this year, hitting its latest record on Friday.
The rally has been driven by enthusiasm for AI, with stocks like Nvidia (NVDA) and Apple (AAPL) hitting all-time highs.
This year, that momentum has propelled the Dow Jones Industrial Average (^DJI) above 40,000 and the S&P 500 above 5,000.
The S&P 500 is off to its 16th strongest start to the year since 1950, according to data from Truist chief market strategist Keith Lerner. The index has risen in seven of the past eight months.
Part of Laidler’s theory will be put to the test this coming earnings season, which begins with banks like JPMorgan (JPM) and Wells Fargo (WFC) reporting their results.
FactSet projects second-quarter earnings growth for S&P 500 companies to be 8.8%, which would mark the index’s best year-over-year growth rate since the first quarter of 2022. It would also mark the index’s fourth consecutive quarter of year-over-year earnings growth.
The communications services (18.5%) and information technology (16.1%) sectors are expected to see double-digit revenue growth.
“We are in a very fundamentally supported market, with earnings recovering and interest rate cuts on the horizon,” Laidler added.
Goldman Sachs portfolio manager Brooke Dane said in the opening bid that the outlook for AI stocks remains bright despite the big rally, which you can listen to below.
Three times each week, Yahoo Finance Editor-in-Chief Brian Sozzi holds insightful, market-focused conversations and chats with some of the biggest names in business on Opening Bid. Check out more episodes on our video hub, available on your favorite streaming service, or listen and subscribe on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
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