Jonathan Kitchen
A much better distribution of earnings growth by the end of the year is setting up the stock market for better returns after recent pullbacks, said Tony Dwyer, Canaccord Genuity chief market strategist.
In a CNBC interview, Dwyer said that although the “Magnificent Seven” stocks -- Microsoft (MSFT), Apple (AAPL), Nvidia (NVDA), Alphabet (GOOGL), Amazon (AMZN), Meta (META) and Tesla (TSLA) -- have carried 100% of the earnings growth, leaving the rest of the stock market with technically negative earnings, “the end of this year is going to change.”
The real “bull story” of the broadening of the markets should come after the lowering of rates, and after hopes for a broader distribution of earnings, he said.
“Our game plan, coming into this year, was to have some corrective action based upon the historic run we’ve had, and we're in the process of that,” he said. “Once you work your way through that, it’s going to be set up for a real good ending to the year.”
Dwyer also said that equities have been up “so far, so fast,” as optimism became extreme, and “everybody that wanted to buy had bought.”
Canaccord Genuity’s weekly stochastic for the S&P 500 (SP500), which measures the closing price in comparison to the high and low range over the prior 14 weeks, was about 90 for about 19 straight weeks. “That doesn’t just happen,” he said. “It’s historically pretty unique.”
Of course, that optimism is destined to end up in a pullback, he added. “And higher rates have given us that opportunity for a pullback. Honestly, it looks a lot like it did last August. You're in a bull market, you had a heck of a run, you got overly optimistic across the board, and you're getting a pullback based on rates.”