BlackRock executive Rick Rieder believes investors should stay the course in the equity market, noting that the earnings growth story is in full swing.
The News
In an interview at the CNBC CEO Council Summit, Rieder says corporate earnings are growing so fast that multiples are lower today than they were nine months ago, even though the market is trading at all-time high levels.
“I think we’re going through an extraordinary period of time. I mean, in fact, 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 [one -year] projected earnings growth, talking about 20% plus earnings growth. That is incredible.”
While Rieder acknowledges the known market concerns, he urges investors to stick with it, believing that the positive fundamentals and the technicals outweigh the risks for now.
“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.
That being said, like when you step back and say, ‘Ok, these are the multiples I’m buying at.’ And I said, ‘Gosh, it’s actually not that scary.’
I was looking at the Mag 7 today. I mean, you’re talking about a 26 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 OK.”
What It Means for Investors
In May, banking giant Goldman Sachs raised its year-end target for the S&P 500 to 8,000 from 7,600, while projecting earnings per share (EPS) of $340 in 2026, marking a 24% increase from the previous year. The bank also shared a chart showing how earnings estimates are rising faster than the index.
Looking at the Mag 7, the data supports Rieder’s statement that their valuations are mostly justified. If earnings are growing 30% to 40%, a forward P/E between 19.79 and 31.62 can be justified because investors are paying for rapid profit expansion. 
Source: The Motley FoolTurning to technicals, the S&P 500 is in “blue skies” territory, meaning there is no resistance that can cap the index’s rally. The relative strength index, a momentum indicator, is also above 70, suggesting strong bullish momentum.
As for the Mag 7 (MAGS), the chart shows it has broken out of resistance at $68 and appears to be flipping the former resistance level into support, with rising momentum.
All in all, the fundamentals and technicals look solid for the stock market. While there will certainly be periods when the markets pull back, Rieder’s stance to stay the course over the long term looks valid.
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