Jurrien Timmer, Fidelity Investments’ director of Global Macro, said that corporate earnings momentum combined with seasonal tailwinds could push the S&P 500 index above the 8,000 threshold as the current cyclical bull market marks its fourth anniversary.
Four-Year Cyclical Bull Market Milestone
Writing on Oct. 13, on X and LinkedIn, Timmer noted that the benchmark index has risen 113% in nominal terms and 93% on an inflation-adjusted basis since reaching its cyclical low on Oct. 13, 2022.
While noting that the monetary “punchbowl has been empty for some time” due to elevated real yields, he credited sustained corporate profit growth with saving the market from a return to bear conditions.
Q3 Earnings and Seasonal Window Focus
With the third-quarter earnings season commencing, consensus estimates project a 25% growth rate. Timmer remarked that he sees “no reason to not expect a repeat of the past few past stellar quarters,” which could elevate actual growth to 30% or 35%.
“Let’s see if that momentum combined with the start of a bullish seasonal window could be enough to push the S&P 500 index above 8k,” Timmer wrote.
Valuation Pressures and Profit Margins
Timmer highlighted structural divergence underneath headline index performance. High yield credit spreads have widened, and only half of market components remain in uptrends as financial conditions tighten.
Investors currently pay 19 times forward earnings for 30% to 40% growth rates. However, corporate profit margins have climbed to a historic peak of 17.4%, driven by technological breakthroughs rather than COVID recession-era base effects.
Portfolio Positioning Strategy
Evaluating historical cycles since 1950, Timmer observed that the current 48-month bull market duration exceeds the 39-month average, while price gains of 119% (monthly basis) compare to the historical 101% average.
Timmer confirmed maintaining a 60/20/20 asset allocation framework, citing commodities and 1-5 year TIPS as key diversifiers, while noting Bitcoin (CRYPTO: BTC) may be initiating a new 4-year cycle.
How Have the Stock Markets Performed?
The S&P 500 index has advanced 13.83% year-to-date. Similarly, the Nasdaq Composite index was up 17.26%, and the Dow Jones gained 7.17% YTD.
On Monday, the SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq-100, respectively, closed mixed. SPY fell 0.06% to $778.10, while QQQ declined 0.70% to $746.04. Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), ended 0.35% higher at $517.91.
In premarket trading on Tuesday, SPY dipped 0.07%, QQQ declined 0.69%, and DIA rose 0.82%.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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