Despite analysts bullish predictions that the Standard & Poors 500 Index on track to post earnings of 27% in the second quarter, many stock market investors during the past month expressed their skepticism through widespread selling, BusinessWeek reports.
Investors who were battered by the last market crash are increasingly wary of the strong market performance coming to an end, according to BusinessWeek. But continued growth led by the information technology, materials and energy sectors suggests that bearish sentiments are unfounded.
Analysts say the growth is real rather than a product of corporate cost cutting because average sales figures of S&P 500 companies rose by 11% during the previous quarter. Based on these strong earnings reports, many analysts predict second-quarter earnings for companies in the S&P 500 Index to grow by 24% on a year-by-year basis with a 21% jump in earnings by yearend.
To be sure, global politics remain perilous, but at the same time, core financial trends provide reasons for optimism. For example, oil prices are expected to remain high while multiples of stocks in the S&P 500 are expected to fall to 19.3% from the 20-year average of 21.5%, a difference of 10%.