The Bottom-Up "Miracle"

Tyler Durden's picture

As we head into the heart of earnings season, amid the drastic slashes in guidance that we have seen in the last few weeks (for example here and here), we thought the following six charts may shed some further light (in addition to this eye-opening chart) on what is going on under the covers of the multiple-expanding, fundamentals-don't-matter, unreality that is the US equity market...

 

First things first, it's all beta, no alpha all the time...

 

and valuation differences have compressed to near-record lows (i.e. everything is floated by the same multiple-expanding hope-driven liquidity fuel)...

 

and asset appreciation has entirely disconnected from real earnings growth...

 

and it's all driven by a screaming surge in margin improvement expectations... (be careful what you wish for equity assset managers who are calling for bond markets to collapse - if rates rise, this margin is gone...)

 

and the margin improvement is across everything!! 91% of the S&P 1500 companies are expected to increase margins in the next year!!!

 

as Earnings have been moving in one direction for two years...

 

Charts: Morgan Stanley