Data Update 2 for 2024: A Stock Comeback - Winning the Expectations Game!

Despite concerns about inflation and a potential recession at the beginning of 2023, US stocks rebounded strongly, with the S&P 500 rising by 24.23%. This recovery was uneven, with technology stocks leading the gains. However, the market's positive sentiment has resulted in higher equity valuations and lower expected returns. While investors are more optimistic about 2024, expectations for stock performance have been reset. The implied equity risk premium has declined to 4.60%, suggesting a lower return potential. Historical data shows that the current expected return and equity risk premium are within historical norms. The intrinsic value of the S&P 500 is estimated to be around 5202, with a range of 3670 to 5200 based on uncertainties. This implies a potential overvaluation of the market at its current level of 4750.