June 09, 2021

Our model estimates the odds of a double-digit earnings growth in the 15% range during 2021 at better than 3 in 4 and the likelihood of earnings growth exceeding 20% at about 2 in 3. Figure 4 also shows the surge in earnings to matching the V shaped recovery. As the economy returns to trend in 2022, we expect the earnings growth to decline accordingly. What type of valuation will such an environment produce? Our forecast paints the following picture for the coming 12 months: An inflation rate below 2% and a solid recovery when incorporated into our valuation model point to a strong double-digit equity appreciation over the next four quarters.

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