The bull run in stocks may have more room to stampede ahead.
“We are in the early innings of a bull market where the earnings recovery story has barely begun,” said Ben Laidler, head of equity strategy at Bradesco BBI, during the Opening Bid podcast with Yahoo Finance Executive Editor Brian Sozzi.
Laidler, who has previously worked at HSBC and JPMorgan, anticipates the Federal Reserve will cut interest rates twice this year, which, along with expected strong earnings growth, should boost investor enthusiasm even further.
These factors could help lift stocks by at least 100% over the next five years, Laidler argued.
“Earnings might easily compound at 15% a year if the economy keeps chugging along and you get a little bit of multiple expansion, which I think lower interest rates would justify,” he said.
The current bull market is considered to have started in October 2022, when the S&P 500 (^GSPC) reached its most recent low. Since then, the index has soared by 55%. So far this year, the index has gained nearly 17%, reaching its latest record on Friday.
The surge has been fueled by enthusiasm around AI, propelling stocks such as Nvidia (NVDA) and Apple (AAPL) to record highs.
This year, the momentum has pushed the Dow Jones Industrial Average (^DJI) beyond 40,000 and the S&P 500 beyond 5,000.
According to Truist chief markets strategist Keith Lerner, the S&P 500 is experiencing its 16th strongest start to a year since 1950. The S&P 500 has now risen in seven of the past eight months.
Laidler’s thesis will be tested in the upcoming earnings season, starting with results from banks like JPMorgan (JPM) and Wells Fargo (WFC).
FactSet estimates second-quarter earnings growth for S&P 500 companies at 8.8%. If achieved, this would mark the highest year-over-year growth rate since the first quarter of 2022 and the fourth consecutive quarter of year-over-year earnings growth for the index.
Double-digit earnings growth is expected in the Communications Services (18.5%) and Information Technology (16.1%) sectors.
“We are in a very fundamentally supported market. Earnings are recovering, and rate cuts are coming,” added Laidler.
The outlook for AI stocks remains strong despite significant gains, said Goldman Sachs portfolio manager Brook Dane on Opening Bid. Listen in below.
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