Stock market outlook: Perfect mix of low yields and strong earnings mean big upside - Business Insider

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US stocks are facing a perfect alignment of conditions that will help monstrous earnings growth translate into sizable share gains, according to a Wall Street chief strategist

Two crossed lines that form an 'X'. It indicates a way to close an interaction, or dismiss a notification.Expectations for strong profit growth amid low yields in 2021 should send stocks soaring, said James Paulsen, the chief investment strategist for The Leuthold Group.

The market can finally see a light at the end of the tunnel. Vaccine distribution, the likelihood of more stimulus, and pent-up consumer demand all stand to supercharge economic growth through 2021. A return to pre-pandemic economic health will push investors' focus back to fundamentals, Paulsen said, adding the market's backdrop paves the way for strong returns.

The dynamic shifts when yields sit higher. When Treasury yields stand in their middle tripartite, there's little difference in how earnings affect returns. Weak quarterly figures end up driving slightly stronger market returns, Paulsen said.

 

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