The stock market is approaching a ‘once-in-a-generation’ buying opportunity as profits are about to take off almost everywhere, investment firm says

Reuters

Stocks are approaching a “once-in-a-generation” buying opportunity, analysts from RBA said.
Corporate profit indicators are hitting a trough in the US and global stock markets.
That means earnings are about to take off in nearly every area of the market, the firm said.

Investors could soon face a once-in-a-lifetime investment opportunity in stocks, thanks to a coming pop in corporate profits across sectors of the market, according to the investment firm Richard Bernstein Advisors.

“Our view has been that the economy isn’t actually landing,” RBA said in a note Tuesday, pointing to fears that the economy could be headed for a hard landing, or a coming recession. “Furthering the airplane metaphor, we see profits taking off …Corporate profits are accelerating and the overall economy looks set to remain quite healthy.”

Though global stocks tipped into a profits recession this year, earnings appear to have troughed, RBA said, and the firm is expecting profits to accelerate into the end of 2023 and in 2024. 

In the US, leading indicators for corporate profits have also bottomed, which suggest that earnings will gain momentum into next year. The firm see S&P 500 earnings growth to pick up 10%-15% through 2024.

Those growth trends are supported by a highly robust economy. Before adjusting for inflation, GDP grew a whopping 8.5% the past quarter, the highest pace of nominal growth seen since 2006.

And that growth already appears to be showing up in corporate earnings. There are around 130 US firms that have reported at least 25% earnings growth as of October, according to an RBA analysis. 

Profits could jump in nearly every area of the stock market, the firm predicted, apart from companies among the Magnificent Seven, which have seen shares soar this year already on Wall Street’s enthusiasm for artificial intelligence. By now, those megacap tech giants are overvalued, RBA said, which makes virtually any other bet a great opportunity for investors.

“Such narrow leadership seems totally unjustified and their extreme valuations suggest a once-in-a-generation investment opportunity in virtually anything other than those 7 stocks,” the firm added.

Other market forecasters have made a bullish case for stocks through the end of the year, despite the S&P 500 set to end October with a third consecutive monthly loss. That decline has largely been sparked by surging bond yields and fears of higher-for-longer interest rates in the economy, though there are some signs that equities could quickly rebound from the recent correction.