Here’s a chart of what that forecast looks like in the context of the dotcom and credit bubbles. The trajectory almost seems irrationally bullish, but Kostin has his reasons.
Assuming his earnings forecasts hold, which is a big assumption considering its low volatility and upward trajectory, valuations should hold relatively steady.
But they would nevertheless be on an upward trajectory.
“Our new P/E assumptions include a premium to our fair value models,” wrote Kostin.
In his note distributed last night, Kostin reiterated his list of 6 reasons for being so bullish.
- Wide equity vs. bond yield gap.
- Stagnation ends.
- Recovery in labour and housing.
- Easy Fed Policy.
- Reasonable valuation.
- Better equity flows.
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