Daily Brief - The great ascent

TLDR: The S&P 500 has done it again – reaching an all-time high that has Wall Street buzzing with a mix of excitement and disbelief. So what's fueling this unprecedented climb?

The recent rise can be partially linked to robust financial results from key companies, revealing a degree of corporate strength that had been underestimated before.

However, this upward movement is not just due to company performance. Low unemployment, steady consumer spending, and the Federal Reserve's relatively gentle policy stance have all played a role in fostering a positive environment for the stock market's growth.

According to Toggle's analysis, based on 21 similar past events where the S&P 500 saw significant gains, the index could potentially reach around 4900 by February.

Moreover, historical data indicates that when the SPX's forward P/E exceeds 20x, it can often lead to additional gains in the index, with an average increase of 4.5% over a one-month period.

Nevertheless, seasoned market watchers are urging caution. With shifts in interest rates and ongoing global political uncertainties, it's valid to question whether the current market enthusiasm is justified.

Clarity on this issue is expected to come from upcoming economic data and corporate earnings reports, provided that the geopolitical situation remains steady.

Market Movers: If SPX is overvalued?

Here are the historically best and worst performing US stocks on a median basis post the SPX's forward P/E crossing 20x:

Top 3 Performing Stocks:

1. ENPH (Enphase Energy, Inc.) with a 6-month return of 67.44%.
2. AMZN (Amazon.com, Inc.) with a 6-month return of 50.20%.
3. TSCO (Tractor Supply Company) with a 6-month return of 43.63%.

Bottom 3 Performing Stocks:

1. DXCM (DexCom, Inc.) with a 6-month return of -80.32%.
2. UAA (Under Armour, Inc.) with a 6-month return of -53.88%.
3. ALGN (Align Technology, Inc.) with a 6-month return of -47.57%.

Earnings Update: United Airlines reports tonight

United Airlines is expected to show a dip in Q4 earnings due to increased fuel costs and operational changes due to the Israel-Hamas conflict.

Fuel costs have risen by 20% since mid-July 2023, impacting the company's bottom line. Analysts have adjusted their expectations, anticipating an EPS of $1.61, down from a previous expectation of $2.26.

Discover how other companies could react post earnings with the help of TOGGLE's WhatIF Earnings tool.

Asset Spotlight: Nvidia: rising valuations and margins

Toggle analyzed 4 comparable instances in the past where analyst expectations for Nvidia's valuations are high. Historically, this has often been followed by an increase in Nvidia's stock price over the next 3 months.

Nvidia's free cash flow margins are projected to reach around 50% by 2025, indicating a high level of efficiency and profitability. Additionally, their net margins are expected to be amongst the highest in the industry by 2028.