Checking the Foundations of a Roaring Bull Market

In this episode of Notes on the Week Ahead, David Kelly reflects on the current state of the U.S. stock market, drawing parallels to the market's low point during the 2009 financial crisis. He discusses the significant growth of the market since the 1980s, attributing it to factors beyond economic growth, such as a rising profit share of GDP and higher P.E. multiples. Kelly examines the sustainability of these trends, considering GDP growth, profit share, and valuations. He suggests that while the U.S. economy should avoid a recession, sluggish growth and limited potential for further margin increases pose challenges. Kelly also cautions investors about high P.E. ratios and the potential for unexpected events to trigger a bear market, advising them to diversify their portfolios.