Champagne-Popping Returns May Let the Froth Out of the Markets
- S&P 500 Index has risen almost a stunning 25% so far this year
- Investors are counting on earnings growth to stand out in 2022
Photographer: Brent Lewin/Getty Images
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If fund managers had bought a basket of stocks closely resembling the S&P 500 and had played chess all through 2021 -- if only to resist the temptation to churn their portfolios incessantly -- they would perhaps have won bragging rights in their board rooms. Next year, we are told, they would like to rinse and repeat.
Fund managers are the most overweight they have been on U.S. stocks in seven years, according to a survey by the Bank of America. Economics 101 tells us that the expected return on equities is the sum of their dividend yield, nominal earnings growth and change in price-earnings ratios and changes from repurchase returns.