Global equities have shown some real improvements, especially in U.S. stocks and related exchange traded funds. Further gains in the U.S. markets will largely depend on earnings growth, says an iShares analyst.

The global equities market has gained 25% since its October low on the more stable outlook as fears of a double-dip recession and a potential Eurozone implosion lessen, copious liquidity fueling investments and improving labor market, writes Russ Koesterich, iShares Global Chief Investment Strategist, in a research note.

Meanwhile, the SPDR S&P 500 (NYSEArca: SPY) has gained 12.4% year-to-date. [ETF Spotlight: SPDR S&P 500]

After the robust gains, U.S. large-cap stocks are now trading at 14.5x trailing earnings, which is in line with other developed markets.

“Valuations at these levels are unlikely to be a significant headwind, particularly given the low-yield environment,” Koesterich said. “And we do not believe rising bond yields represent a serious threat to the market: historically, equities have been hurt by rising inflation expectations, not real yields.”

However, Koesterich cautions that rising valuations will not power the next run in U.S. equities. [Are Stock ETFs Still Cheap After Rally?]

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