Is the market in a bubble? We may be due for a sustained correction, but it will be just that — a correction. Stocks are in a secular bull market, analogous to the second half of the 1990s as we have argued for almost three years, writes Nancy Tengler, CIO of Laffer Tengler Investments.
If we are correct, then there is plenty of room for continued outperformance. Earnings season is telling us that companies are successfully navigating tariffs and a changing technology environment. We continue to hang our bull hat on productivity-driven growth.
SPDR S&P 500 ETF (SPY)
We are watching breadth, which is lacking but certainly not fraught with weak internal days like we saw in March/April – and also see before corrections. We are also watching margins and top-line growth, which is surprisingly robust. And earnings have delighted to the upside.
Historically, based on BEA data since the mid-1980s, every US recession and major bear market was preceded by periods of profit contraction. The lead time averaged 10 months. We are seeing no evidence of deteriorating earnings.
In fact, corporate profits per employee have soared to record highs. We just don’t see a recession for the foreseeable future. As we did in March/April and during previous corrections, we will use weakness to add to high-quality names.
