This change in one market driver may revive the stock rally
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Whether the stock market, which recently saw a 10% pullback, can resume its previous rally will largely depend on whether earnings growth — rather than valuation expansion — takes over as
the key driver of market performance, according to Christian Floro, senior associate and market strategist at Principal Asset Management. Historically, markets have tended to continue to
climb when earnings take the reins from valuations as the main driver, Floro wrote in a Monday note. Shorter market cycles that were purely driven by earnings growth have tended to last
about 29 months, with a 55% gain on average historically, Floro noted.