2024 the Year with 18% of Earnings Growth and Recession Forecasts
Both the consensus and my highly respected team at Goldman Sachs forecast around 18% earnings growth by the end of 2024.
I was reading some year-ahead outlooks for the end of this year and into the new year. What continues to shock me is the number of recession forecasts.
People will be forecasting a recession until one actually happens, but in the meantime, they’ll probably miss out on too many market gains to make their call worth it.
In one case in particular — not going to name names — they project quite a healthy amount of earnings growth over the next few years. However, they set the valuation on those earnings lower than the 7-10 year average, which would make anyone bearish.
When the only fundamental problem with the stock market is its earnings multiple, I think you have a pretty good problem. And the funny thing is, the current multiple isn’t even that concerning.
When you look at the long-term attribution of stock market returns, around 70% comes from earnings growth, 20% comes from valuation, and 10% comes from dividends and buybacks.
So that brings me to the point of this post. Both the consensus and my highly respected team at Goldman Sachs forecast around 18% earnings growth by the end of 2024. With that information, a good starting point for the market could be 12.8% for the year (18% * 70% + 2% * 10%), if valuations don’t change.
Now that weighs heavily on the other 20% that is incredibly hard to forecast, and it matters more and more the shorter the timeframe you use. So I can’t be confident by any means in that number, and you shouldn’t be either.
Let’s hope for a boring year; a lot of money can be made in a boring year!
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