McKinsey asks: What's behind this year's buoyant market

McKinsey asks: What's behind this year's buoyant market. For much of this year, the S&P 500 index has demonstrated fitful but steady growth, lifting it from just over 1,800 in January to just over 2,000 in September - a new record. That's something of a disconnect with lackluster economic growth and rising interest rates, and it has investors puzzled and executives casting a gimlet eye on their share prices. Whether you think the market is dangerously overvalued, as some worry, or that current high corporate profits and multiples are the result of fundamental changes in the performance of companies depends on your expectations of profit growth, cost of capital, and returns on capital. In fact, much of the market's value today is clearly tied to underlying sources of economic performance - and, in particular, the high level of profit margins in several high-performing sectors. McKinsey analyses the lofty PE ratios and profit margins to deliver their prognosis in this article: (VIEW LINK)


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