Overheated Market? Fidelity's Jurrien Timmer Believes It's 'Almost' In A New Bull Run

Jurrien Timmer, Director of Global Macro at Fidelity, believes the market is almost in a new bull run and said that the earnings outlook is improving. Indeed, the index officially entered a bull market on June 8, surging more than 20% since its October 2022 lows.

"Yes, the S&P 500 is up 20% from the low but that's an arbitrary measure that so far only applies to the cap-weighted index. To be in a confirmed bull market we need to see three things: a path to an earnings recovery, a path to the end of the rate cycle, and better market breadth. The latter, of course, is very much tied to the first two," he said in a tweet.

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Timmer's remarks come at a time when the general trending opinion among experts is that the market may be a bit overheated with the recent AI-optimism-led rally. For instance, Foord Asset Management portfolio manager, Brian Arcese said inflation is still going to be persistent and that the markets are probably getting a bit ahead of themselves.

Indeed, much of the rally in the S&P 500 this year has been driven by tech stocks. Stocks like NVIDIA Corporation NVDA, Advanced Micro Devices, Inc. AMD, Taiwan Semiconductor Mfg. Co. Ltd. TSM and Microsoft Corp MSFT have registered significant gains since the start of 2023.

The SPDR S&P 500 ETF Trust SPY has gained 13.91% since the beginning of 2023 while the Invesco QQQ Trust Series 1 QQQ rose 36.30%, according to Benzinga Pro.

Earnings Outlook: Timmer explains that the earnings outlook is improving and the breadth of estimate revisions is getting better. The percentage of stocks in the S&P 500 with rising estimates from three months ago is 47%, up from 27%, he argued. "With inflation still at 5% in the US, the quality of those increasing estimates is less than the previous cycle, but still, it's an improvement," Timmer said in his tweet.

The expert noted that the earnings picture is improving or at least is getting less bad and that the downside progression of 2023 calendar estimates has flattened out. "Just a few months ago, I figured that the 2023 consensus estimate was on its way to a 10% decline, but now we have gone from -5% to -4%," he said.

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