Over the last 12 months, the S&P 500’s advance was built on a narrow but relatively durable foundation – rising profit expectations, rather than investors willing to pay more for the same earnings.
That distinction is central to an outlook discussed by Ritholtz Wealth Management CEO Josh Brown and DataTrek co-founder Nick Colas. In their view, the rally’s quality matters as much as its size—and this one, so far, has been built on earnings, not euphoria.
At roughly 20 times the earnings, the scope for a further rally depends largely on whether analysts continue to lift forecasts—and whether risks from interest rates, oil and geopolitics ease enough to justify a higher valuation.
Brown and Colas review three bullish paths for the next 12 months, noting that each one demands evidence, not optimism.
Earnings Carry, Valuations Stay Put
The preferred interpretation of the current tape is straightforward. If the market keeps delivering profit growth, it can still rise without any help from valuation expansion.
Colas puts the most likely upside at 6% to 16% with the S&P 500 multiple staying around 20x.
“No expansion… we just maintain the multiple we’re at, but the corporate earnings growth that we’ve been experiencing continues,” Brown noted.
At current valuations, there is little room for disappointment, but also a clear path for returns if corporate America (especially mega-cap) keeps executing. Colas supports that point with data, noting this year’s move has been “100% earnings” and that in most years analysts “start high and trim,” not raise forecasts midyear.
What Unlocks a Better Outcome?
Colas sees the middle scenario implies 13% to 28% upside, requiring both earnings growth and multiple expansion to about 22x.
“That would be awesome, but that’s not most likely,” Brown said, pushing on the probability versus possibility.
Here the scenario expands into geopolitics, oil and valuation in one chain. If conflict risk fades and energy prices retreat, inflation pressure eases, rate volatility calms, and investors may pay more for each dollar of earnings.
The AI Test Is Revenue, Not Narrative
The most bullish path, 12% to 39% upside with a 24x multiple, draws the sharpest challenge. Colas insists that AI enthusiasm must convert into measurable revenue across both suppliers and customers, not just coding productivity.
It’s an argument similar to Bob Elliott’s recent Kellogg’s remark, where the economist argued that the ultimate revenue must come from the real economy.
Investors need confirmation across the full AI stack with monetization and enterprise customers showing earnings tied to AI spending. The most bullish scenario isn’t impossible, but everything has to align for it to work.
“You need all three things to go right. The sun, the moon, the stars, they all have to align,” Colas concluded.
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