The “Raging Bull” Could Be Running Out of Steam

The mood surrounding today’s stock market seems to be rife with contradiction, according to an article in yesterday’s Fortune. “At today’s elevated prices,” it argues, “the market math contradicts Wall Street’s sunny outlook.”

The article cites a recent interview with Goldman Sachs’ chief global equities strategist Peter Oppenheim that supports the thesis. While Oppenheim argued that the Trump effect has “overpriced the ability of the administration to push through some of the things the market is priced for,” he tempered his comments by adding that any correction would be temporary—that the bull would keep running.

Three possible market scenarios are outlined, none of which are terribly optimistic. First, if investors were to earn high returns from the current “lofty” price-earnings ratio of 24.6, it says, “super-charged earnings growth” will be necessary. If mediocre returns are expected, it would signal a widespread belief that “U.S. stocks are now a slow-growth, low-risk, low-return, dull but stable place,” a lackluster outlook compared to what the article terms “Wall Street’s raging bull market hype.” The third and most cloudy forecast is that current earnings growth, which is outpacing that of the economy as a whole, reverses and leads us into a scenario where corporate profits decline and investors suffer the letdown of negative returns.

In any case, the article argues, the notion that the “bull market will keep roaring is Wall Street bull.”