BlackRock chief investment officer Rick Rieder believes that the bull run in US equities will continue, driven by higher earnings estimates.
In a new interview at the CNBC CEO Council Summit, Rieder says the market is in the midst of an “extraordinary period of time” as stock prices rise while earnings multiples fall.
While Rieder mentions a few market risks, he says the earnings growth story is fueling the market’s ascent to new all-time high levels.
“I don’t think we’ve ever seen anything like this in terms of you’ve got a market that’s doing extremely well. The cash keeps coming into these markets. And the multiples, though, when you actually look at it relative to where you were, particularly in tech and semis, are actually lower than where we were if you go back to October.
The earnings growth, I was looking this morning at the projected [one-year forward] earnings growth, talking about 20%-plus earnings growth. That is incredible. So yes, there’s a lot of uncertainty. Yes, there are things to be careful about. I worry about crowding in different markets, not just in overall markets, but in single-name stocks where you see more crowding, more momentum trading than I’ve ever seen before.”
The BlackRock CIO says he’s keeping a close watch on the Magnificent 7 names, highlighting that their valuations are justified due to exceptional earnings growth.
“I was looking at the Mag 7. I mean, you’re talking about a 26x multiple for companies that are throwing off earnings growth of 30%-40%.
So yes, there’s a lot of uncertainty. There’s a tremendous amount of cash. There’s a tremendous amount, even with the IPO calendar, which is large. There is still a tremendous amount of buyback going on. So I think the technicals are good. Listen, I think you’ve got to stay in it. And I think the equity market will probably continue to do okay.”
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