So far this year, the U.S. stock market, as measured by the S&P 500, has returned about 10% — an average year's worth of gains in just over three months.
As of late, the ratio is at about 190% — the highest mark in two years. In calendar year 2022, the last time stocks traded in this territory, the S&P 500 dropped 18%. Buffett's favorite indicator is a blinking light to investors that stocks are in shaky territory compared with historical norms. But dig into what's been driving stocks, and you'll find that the current run isn't just a product of investor enthusiasm.
"The most profitable names are doing very well. They're not speculative," Chaudhuri says. "The fact that earnings growth continues to be what's fueling returns is pretty comforting to me and should be to investors as well.""GDP growth remains strong, the consumer continues to spend and earnings growth as been healthy and above expectations," says Young.
Chaudhuri's stock market outlook for the remainder of the year skews more bullish, but she says investors shouldn't expect up-and-to-the-right performance over the next nine months.