A month ago, the U.S. market was in a state of turmoil. Now analysts are raising earnings forecasts, and options on the S&P 500 Index in the 4800 - 4900 range are gaining popularity.
Optimism on the Horizon
The belief in a bright future is striking; the supply and demand balance is aligned in a way that 2023 could be one of the best years for the NASDAQ, despite historically low household savings rates and reduced spending by businesses (the market's primary buyers) on shareholder politics.
Share repurchases in 2Q23 are 40% below the all-time high reached in 1Q 22, and 12-month total share repurchase spending is down nearly 20% year-over-year (YoY).
Market Yield Analysis
Dividend spending has been stagnant for a year, while the compound annual growth rate was nearly 10.5% from December 10 through December 19. Dividend stagnation was observed in 2015 - 2016 and 2020 - 2021, indicating deteriorating financial performance (lower free cash flow).
At the current market capitalization, the dividend yield falls to 1.45%, and share repurchases are around 2%, implying a total market yield of less than 3.5% (a 20-year low), well below the sustainable range of 4 - 5% observed in 2011 - 2019, with a weighted average yield of around 4.7%.
However, while money market rates were close to 0% in 2011 - 2019, and the average 10-year Treasury bond yield averaged about 2.3 - 2.4%, and the market produced net positive returns, it is now negative (money market and deposits are producing much higher returns for the first time since 2000).
Conclusion
In conclusion, the recent transformation of the U.S. market from turmoil to an optimistic landscape has been marked by rising earnings forecasts and the popularity of options on the S&P 500 index in the 4800 - 4900 range. Despite challenges such as historically low household savings rates and business spending cuts on shareholder policies, faith in a bright future remains strong, hinting at a potentially stellar year for the NASDAQ in 2023.