Profit margins are important and the high commodity prices mixed with high energy costs may tug on this. However, many companies are finding historically cheap labor and capital, so the prospects remain stable for now, he says. [Now What For S&P 500 ETFs After Rally.]
Multiples will get a push from multiple expansion or rising price-to-earnings (P/E) ratios. Fading deflation threats and large cap valuations that are still reasonable are good signs, Koesterich argues.
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Tisha Guerrero contributed to this article.