S&P 500 Rally Driven by Optimism Rather Than Fundamentals, Risks Ahead
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S&P 500 gains have been driven more by multiple expansion than improving earnings outlook.
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Earnings growth estimates seem optimistic given sales growth likely to stall with lower inflation.
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Margin expansion expected to drive earnings growth, but trends suggest contraction in 2024.
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Buybacks not as strong recently, so less tailwind for earnings growth.
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Rally seems driven by perception of brighter outlook, not fundamentals.