“We think the M&A environment is very positive,” he said. “If you think about why M&A is happening, companies have a lot of cash and valuations are at reasonable levels. You throw in low interest rates and companies have cheap financing on the private equity side. So, we think M&A will continue to be supportive of markets, but ultimately markets come down to earnings. We think the earnings environment is still very conducive to mid-single digit growth.”
Richard Cripps, managing director of Portfolio Strategy at Stifel, Nicolaus Capital Markets, said he expected the market to rise in the near term, but urged caution.
“We’re in a mature stage of this bull market,” he said. “It’s all about P/E expansion. I don’t think it’s an earnings driven market at all. I think it’s simply the fact that there’s a lot of momentum and investors want to get on and the cheapest part of the market tends to be the Dow or the S&P 500 and that’s where the money flow is going."
In part, he said investors are playing the market's momemtum.
"I think we have a lot of momentum and this market is going to continue to go higher, but we also have to recognize that we’ve gone an extended period without any kind of correction and we are in a more mature phase of the cycle where it’s all dependant on P/E ratios," Cripps said. "So, at the end of the year, I wouldn’t be surprised if we have levels very different from where we are today.”
