Stock markets: the profit-free rebound

The S&P 500 and FTSE 100 indices are at seven- and five-month high, as investors concentrate on economic recovery and cheap valuations. But by ignoring the earnings picture, there is plenty of scope for disappointment.

"The bulls are in control," says Vito Racinelli in Barron's. Optimism that the worst is over and growth could soon rebound has driven the S&P 500 and FTSE 100 indices to seven- and five-month highs respectively.

Because they have concentrated on economic recovery and cheap valuations of late, the earnings picture "has mattered little to investors", says Andrew Lapthorne of Socit Gnrale. Yet on this front there's ample room for disappointment, which investors can't ignore for much longer.

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