Goldman Sachs broker Richard Coppleson says he is bullish on the US market for the next 2 years, citing the close long term correlation of the S&P 500 with US earnings. Based on this correlation, if earnings are expected to rise then the US stock market will also increase. Earnings, on the other hand, are strongly correlated with rising (or falling) GDP. Coppleson notes that 2Q GDP data, which showed an annualised growth rate of 1.7%, was a major positive for US earnings and consequently the US stockmarket. As the broker is currently forecasting US GDP to accelerate to 3% for both 2014 and 2015- this will underpin the US market rally for the next 2 years. According to Coppleson, there will be corrections and times when the market appears overvalued, however, the big picture is that the US stock market will increase much higher than investors realise.
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