Recovery on the stock market: an eye on valuations and interest rates!

Recovery on the stock market: an eye on valuations and interest rates!

According to a report by www.capital.de, the stock markets were able to recover from their October correction, and new highs are already on the horizon in the USA. The valuation and falling interest rates give cause for hope. Looking back at the past US reporting season, a familiar pattern emerged. The analysts had set the bar quite low in advance and had expected falling corporate profits, but the companies actually increased their profits by a good three percent compared to the previous year. This suggests that analysts' expectations were too pessimistic.

However, the results were distorted by geopolitical uncertainties in the Middle East and an interest rate rally, as these at times moved markets more than new corporate data. Furthermore, the overall earnings results are partially distorted because the weak results of energy companies have put a heavy burden on the balance sheet; without the sector, the S&P 500 would have had an earnings increase of eight percent.

The valuation of the S&P 500 based on earnings estimates for the next twelve months is in the range of the ten-year average with a P/E ratio of 18. If the valuation is not calculated based on market capitalization, but is weighted equally, the key figure is significantly more attractive at a factor of 14. The market is expecting a profit increase of a good three percent for the fourth quarter. At the end of September, analysts were still expecting an increase of eight percent. The forecasts for the first half of the year are very sporty and, given numerous risk factors, there could be downward adjustments, which would lead to a significant increase in valuations.

The impact of this scenario on the stock market could lead to increased volatility and create new uncertainties. Investors could be enticed to rebalance their portfolios and look for higher-yielding investments. In addition, interest rates and economic growth could also be affected, especially if corporate profits do not meet expectations.

It remains to be seen what developments on the stock market will be in the coming months and how investors will adapt to them.

How www.capital.de reported, there are some uncertain factors that could influence the recovery on the stock market. It is advisable to follow developments closely and adjust your investment strategy accordingly to counteract any market fluctuations.