FIVE REASONS U. S. STOCKS COULD RISE EVEN HIGHER

It’s that time of year where bulls in the market are tough to find, but RBC Capital Markets says there’s five reasons that investors should still be bullish on U.S. stocks.

The S&P 500’s multiples are up 55 per cent in the past five years, from 10.5 times to 16.2 times today. RBCCM chief equity strategist Jonathan Golub believes investors will see further upside.

• Cash flow generation: Golub notes companies today are generating 20 per cent more free cash flow from every dollar of earnings.

• Return of capital: Total yield, which includes dividends and buybacks, of the S&P 500 is now 4.7 per cent versus 4.4 per cent for the average 20-year corporate bond.

• Volatility: Golub notes that both realized and implied volatility are running roughly 30 per cent below normal.

• Valuation trends: Golub notes that while valuations have risen, valuations move from low to high and back down over long periods of time.

• Few excesses: Finally, stocks tend to correct when one or more stock groups are outrageously priced. But Golub says there are few excesses in the market now.