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Against odds

As of Friday, 332 companies of the S&P500 have reported earnings. 64% of them have reported results better than expected, but revenue growth so far has been weak (3.4%). As you can see below, when earnings do not grow enough, the market still finds ways to keep climbing, through multiple expansion and dividends. Similar to the period of 2016, Price-to-Earnings multiple is expanding, while earnings regroup. Earnings have in fact been affected by monetary policy, but not enough (at least not yet) to convince investors to abandon the rally. To have a sense of how strong this last part of the movement has been, the S&P500 has not have a 2% correction in the last 70 trading days. Momentum is strong, but narrowly supported by a small basket of stocks.

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Chart source: Fidelity Investments

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