David Kelly on S&P 500 Reaching $5,000
David Kelly, chief global strategist for JPMorgan Asset Management, shared his thoughts on the S&P 500 reaching 5,000, stating that this milestone signifies the tremendous growth in financial assets and profit share of GDP over the years. According to Kelly, companies have thrived in slow-growing economies, resulting in the increasing value of financial assets and a significant rise in the profit share of GDP.
Corporate Earnings, Efficiency, and Market Valuations
Kelly addressed the current earnings season, highlighting the strength of corporate results and margins. He noted that the future growth in earnings may be limited and that the market’s upward trajectory is now more about valuations than earnings growth. Investors tend to push valuations higher in a stable environment, a trend that could continue until a crisis prompts a reevaluation.
2024 Economic Forecast
Kelly outlined a base case for 2024, predicting 2% growth, with inflation and unemployment remaining low. He anticipates a stable environment, which may allow the market to continue its ascent, barring any unforeseen shocks that could trigger a recession.
U.S. Economic Performance and Global Flows
The U.S. economy’s resilience, particularly in consumer spending and business investment, has set it apart from other global economies facing deflationary pressures and weaker growth. U.S. consumers and businesses are key drivers of the nation’s economic outperformance. This domestic strength, coupled with a strong dollar, has made the U.S. an attractive investment destination.
Inflation Outlook and the Dollar’s Role
Kelly discussed the potential for wage growth to remain around 4%, alongside decreasing inflation pressures from auto insurance and shelter costs. He suggested that inflation numbers might grind lower through the year, with the strong dollar helping to offset any spikes in import inflation.
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