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Forget EPS Recession, Fed Is Key; 3125 Target Seems Low

Looking back to the beginning of 2019, I said that as the year unfolded it would look a lot like 2009, arguing that the odds for a double-digit percentage stock market gain were the highest in more than a decade.

It was not because I was optimistic on earnings growth, as I have expected an earnings per share (EPS) recession this year. Instead, I argued that what happens to the market’s price/earnings ratio (P/E) is far more important to investors than the “E” in the P/E. Indeed, so far this is the case, as equity markets were up 17.4% by mid-year, with new high set after new high, and in all the major U.S. indexes. This year is on track to be one of the strongest since the bull market started in 2009.

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