Strong fundamentals
In addition to his bullish earnings outlook, Saut also noted that four forces that have been driving US companies over the past few years remain intact. These include: high levels of creativity, the arrival of energy independence, the huge amounts of capital held in investment funds, and the likelihood of a renewal in US manufacturing sector.
Salt believes all these factors support a view that the current valuation of S&P stock at 17 times earnings may not be as rich as some fear.
“There are more high growth, high margin stocks in the S&P 500 than ever before, so it probably deserves a higher p/e multiple than historic precedent suggests,” he said.
On a longer-term time horizon, he said the charts for the S&P 500 show there was a nominal price low of March of 2009. “Given secular bull markets tend to last 14 to 15 years, there’s probably another 6 or 7 years left. It’s been one of the most hated secular bull markets in history.”
In all, he concludes the outlook for US equities has rarely been better.
“It looks to me, unless there is a Black Swan event or a huge policy mistake out of DC, that everything is coming together for the US for the first time in a long time,” he said.
