Earnings Optimism Tempered by High Valuations and Economic Uncertainties

• Investors should not expect strong earnings to boost stocks much further due to high valuations • There is a gap between optimistic market levels and Fed policy outlooks • Only half of reporting companies have exceeded earnings expectations so far • Complacency around economic outlooks and recession odds may be a market risk
• Inflation staying persistently high could lead to more Fed tightening and rate spike risks