'Investors Seem To Remain Poised For A Good Year In The Markets' Even As Valuation Remains Elevated, Says Fidelity’s Macro Chief 'Investors Seem To Remain Poised For A Good Year In The Markets' Even As Valuation Remains Elevated, Says Fidelity's Timmer - Goldman Sachs Gr (NYSE:GS), Amazon.com (NASDAQ:AMZN)

Jurrien Timmer, Director of Global Macro at Fidelity Investments, expressed concerns about the strength of the S&P 500’s recovery. His insights come amidst a backdrop of soaring valuations and robust corporate earnings.

What Happened: On Tuesday, Timmer stated that the S&P 500 equal-weight index is still below its all-time high, with only 53% of stocks above their 50-day moving average. This, he suggests, indicates a sluggish rebound following the recent 5% decline.

Despite the weak recovery, Timmer noted that sentiment remains constructive, particularly in terms of equity flows. He concluded that the cyclical bull market, now 28 months old, is still in place. However, he also pointed out that only 62% of stocks are above their 200-day moving average, a sign of potential negative divergences.

Timmer further explained, “While valuations are not quite at the extremes seen in 2000, 1973, or 1929, they are elevated at a time when bond yields have become competitive again.”

Why It Matters: Timmer’s observations come at a time when the Warren Buffett Indicator has soared to 205%, suggesting alarmingly high valuations. This metric, which compares the total stock market capitalization to GDP, is significantly higher than pre-crisis levels.

Meanwhile, FactSet revealed that S&P 500 companies have posted a 16.4% year-over-year earnings growth rate in the fourth quarter of 2024, marking the best performance since late 2021. However, investor optimism is being tempered by renewed trade uncertainty. Among the best performers were Goldman Sachs Group GS and JPMorgan Chase & Co JPM from the financial sector, while Meta Platforms META and Amazon AMZN performed best among the communication services and consumer discretionary sectors, respectively.

On the whole, Timmer envisions this super-cycle's "golden years" transitioning from a phase where valuations amplify earnings gains (as seen in 2023 and 2024) to one where they counterbalance them. This wouldn't signal the end of the bull market but would represent the peak of double-digit returns.

The S&P 500, tracked by SPDR S&P 500 ETF SPY, has risen 4.11% over the past month, trading at $605.31 as of Tuesday. The Nasdaq-100, tracked by Invesco QQQ Trust QQQ, is up 4.44% in the same period, trading at $527.99. Meanwhile, Dow Jones Industrial Average Futures are at 44,678.00 USD, down 30.00 points or 0.06% today, according to data from Benzinga Pro.