“U.S. public companies have proven that they can earn excellent returns in a lackluster economic environment,” he added.
However, in a report earlier this month Colas noted some Wall Street analysts were scaling back their second-quarter revenue estimates.
“Revenue growth is a necessary component to a continued – really, a justifiable continued – advance for U.S. stocks,” he wrote. “Cost cutting has taken the market a long way from the March 2009 lows, to be sure.”
But to convince investors there is more room to increase earnings, revenue – the top line – needs to grow. “The unicycle of lean cost structures isn’t enough to earn a higher market multiple,” the strategist said.
SPDR S&P 500 ETF (NYSEArca: SPY)
