Moreover, Goldman Sachs predicts that 2019 will reveal an earnings per share forecast of $170 and $178 in 2020–all readjusted higher compared to their original forecasts.
Nonetheless, Kostin feels that more rate hikes could temper stock prices moving forward, especially after the Federal Reserve just raised interest rates last week by 25 basis points from 1.75 to 2.
“Ongoing policy uncertainty represents a key downside risk for US equity valuations,” said Kostin. “Many of these events pose limited fundamental risk, but could weigh on risk appetite and valuation.”
According to Kostin, bond yields that are moving higher at an alarming pace in conjunction with stock market gains could be a cause for concern. For example, in terms of the benchmark 10-year Treasury note, market analysts should focus on a monthly gain that exceeds 0.1 percentage points per month–a climate that could make way for lower stock market valuations.
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