Rick Reeder, chief investment officer at BlackRock, believes the uptrend in US stocks will continue, driven by rising earnings estimates.
In a new interview at CNBC’s CEO Council Summit, Reeder said He says The market is in the midst of an “extraordinary period” in which stock prices rise while earnings multiples fall.
While Reeder mentions some market risks, he says the earnings growth story is fueling the market’s rise to new all-time highs.
“I don’t think we’ve ever seen anything like this before in that you have a market that’s doing very well. Cash continues to flow into these markets. However, when you actually look at it relative to where you’ve been, particularly in technology and semis, it’s actually lower than where we were if you go back to October.”
Regarding earnings growth, this morning I was looking at projected earnings growth (forward one year), and I talked about earnings growth of 20% plus. This is unbelievable. So yeah, there’s a lot of uncertainty. Yes, there are things to be careful of. I’m concerned about congestion in different markets, not just in the general markets, but in single-name stocks where you’re seeing more congestion and trading with more momentum than you’ve ever seen before.
BlackRock’s CTO says he is closely monitoring the Magnificent 7 names, highlighting that their valuations are justified due to exceptional earnings growth.
“I was looking at Mag 7. I mean you’re talking about a 26x multiple for companies that are taking away 30% to 40% growth in their earnings.
So yeah, there’s a lot of uncertainty. There is a huge amount of money. There’s a tremendous amount, even with the IPO calendar, and it’s significant. There is still a huge amount of buybacks going on. So I think the techniques are good. Listen, I think you should stay in it. I think the stock market will likely continue to do well.
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