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By Vitaliy Katsenelson CFA
The stock market marched higher for the year even though US companies as a whole did not become more valuable, just more expensive, as earnings failed to grow from 2018 to 2019. Earnings are estimated to be up about 5% for 2020 (though these estimates are usually revised down as the year progresses).
If you look at the quality of this non-growth, then the rose-tinted glasses of the average stock market investor quickly prove inadequate. Corporate debt is up 5% in 2019, and a good chunk of the increase went into stock buybacks. As stocks become expensive their benefit from earnings per share growth diminishes.
Assessment: Your thoughts are appreciated.
BUSINESS, FINANCE, INVESTING AND INSURANCE TEXTS FOR DOCTORS:
THANK YOU
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