While being bullish stocks has been RIGHT and very popular (and become main stream CONsensus), some of those out there playing the game have more dogs in the hunt than others…Without diving much deeper, one should ALWAYS check a source and fully understand what motivations are knowable.
Tinfoil hats aside, RATES as an important part of any / all equity calls, are worth exploring and with regards to the numbers in the title (5250 and 40k), here is the part about (discount)RATES which one might consider:
… The key question then becomes what discount rate should we use? If we use 1.50%, roughly the current 10-year Treasury yield, our model suggests the S&P 500 is grossly undervalued. But, with the Federal Reserve still holding short-term interest rates at artificially low levels, the 10-year yield might be artificially low, as well.
So, to be cautious, we plug in some alternative higher long-term interest rates. Using third quarter profits, it would take a 10-year yield of about 2.75% for our model to show that the stock market is currently trading at fair value. And that assumes no further growth in profits.
We expect the 10-year Note yield to finish 2022 in the vicinity of 2.00%. Nonetheless, we have chosen to use a more conservative discount rate of roughly 2.50%. Using third quarter 2021 profits, that creates a fair value estimate for the S&P 500 of 5,250. And this does not take into account higher profits in the year ahead ...
Emphasis MINE. I wonder if backtesting for a rate of 2.50% 10yy would show increases or decreases in stocks as easily as it might seem. I’d be willing to suggest an (global) economy used to ZERO financing rates for so long (for so many important things which touch ALL of our lives, DAILY — auto, home and CC finance rates; stock buybacks), a jump in rates might NOT be so easily translatable into HIGHER equity prices.
In fact, I’d wonder **IF** it’s not necessary for LOWER rates (or lower for longer, LESS tapering / tightening than is priced) to produce said outcomes for aforementioned dart-throwing excercise.
For (somewhat)more straight FROM THE SOURCE …