Stocks continue to trend higher. On Friday, the S&P 500 (^GSPC) closed at an all-time high of 2,182.87.

“Don’t underweight the S&P,” Citi’s Robert Buckland said on Thursday. “This US bull market just won’t die… Since 2010, US equities have returned 123%. That compares to 23% (in US$ terms) from the rest of the world. This has pushed the relative price of US equities to unprecedented levels.”

What’s made this rally particularly impressive is that it’s come as expectations for earnings have fallen. According to FactSet, earnings for 2016 are expected to fall 0.3%, marking the first time the S&P has seen consecutive years of falling earnings since the financial crisis.

All of this has led investors to feel “lost” amid a market that doesn’t seem to make sense.

Unfortunately, there isn’t much optimism on Wall Street regarding what’s next. Here’s a sampling of what some chief equity strategists have told clients in the past week:

• David Kostin, Goldman Sachs: “…In the near term, we forecast a tactical equity pullback given extended valuations and an uncertain political environment in Europe and the US. In the next three-months we expect negative price returns in Asia (-3%), Japan (-6%), US (-10%) and Europe (-11%)…Despite our unattractive short-term view, we expect equities will return to current levels in the next 12 months…”

• Jonathan Glionna, Barclays: “…Profit margins have been declining for more than a year. Dividend growth has decelerated to the lowest level of this business cycle. Leverage is increasing, but remains below average. While we project a rebound in profit margins we note that dividend growth is most likely to continue to decline and leverage is constrained by a high debt-to-EBITDA ratio…We do not believe the fundamental conditions are present to support a prolonged late-cycle rally in equities. Rather, we reiterate our core thesis that U.S. equities are in a period of low returns.”

• Tobias Levkovich, Citi: “…The earnings backdrop is better and provides reason to be constructive on equities over the next year but not necessarily in the next few months. Since EPS trends are linked to stock performance, profit growth is a prerequisite for share price appreciation. Most observers emphasize easier dollar comps and higher 2H16 Energy sector results y/y for EPS gains later this year, but the seventh month in a row of ISM manufacturing new orders above 50 argues more convincingly for a coming rise in industrial production which further supports earnings acceleration…”

• David Bianco, Deutsche Bank: “…Renewed oil price weakness indicates that rebalancing the global oil market will take longer and be bumpier than many expected. 1Q & 2Q results suggest a break even WTI price for S&P Energy profits at $40-45/bbl. We’re uncertain when the Fed hikes, but regardless we expect the dollar to grind upward and 10yr Tsy yields to stay under 2% well into 2017…Next 5%+ move: Down.”

• Brian Belski, BMO: “…Corrections occur when you least expect them. August is traditionally a sloppy month for stocks…we continue to believe the path of stock prices will be a bumpy one as investors contemplate the potential impact of Fed policy, the election and global economic conditions…”

• Tom Lee, Fundstrat: “…August worries us. Bond volatility is unusually high vs equities and has almost always resulted in a weakening of stocks short term. Hence, given seasonals, we worry about an August drawdown of 2%-3%…“

• Andrew Garthwaite, Credit Suisse: “…We think that markets could enter a more difficult period in the second half of 2017. At that point investors could be confronted by a difficult combination of sharply accelerating US wage growth, China hitting a loan to deposit ratio of 100% (and thus unable to roll-over NPLs without printing money) and the market, by that stage, having discounted much more fiscal easing…”

• Julian Emanuel, UBS: “…Is it coincidence that the S&P 500 hit an all-time high in July just as the US 10 year treasury bond yielded an unthinkable 1.36%…looking at the 34 year long secular US equity bull market, accompanied by a 90% decline in the 10 year yield, the case could be made for correlation being causation. While not UBS’ base case, an unexpected move higher in interest rates could be a source of stress for equities in the months to come…”

• Jonathan Golub, RBC: “…Our work points to three key drivers behind higher P/Es: 1) relative attractiveness—S&P 500 total yield (dividends + buybacks) vs. corporate bonds; 2) abundant return of capital; and 3) lower volatility. Separately, the data indicates that P/Es tend to be highest when rates are “normal” (10-year at 3–6%). As a result, our constructive view is predicated on stable or rising interest rates…”

• Sean Darby, Jefferies: “…With our S&P target price almost reached for 2016 (2,180) we lower our recommendation to modestly Bullish within our Global Asset Allocation. While investors might point out the risks of a falling oil price onto high yield markets and the possibility of rising credit spreads undermining stocks, we believe the more likely de-rating for stocks will come from a sell-off in government bonds as is being seen in Japan currently…”

• Adam Parker, Morgan Stanley: “…While the wild cards to earnings from the macro standpoint include lower rates impacting financials, lower oil impacting energy, and a stronger dollar impacting a host of multinationals, our general sense is that earnings should modestly grow. Earnings grew 6% excluding energy last year, and it is likely that the energy earnings will be higher in 2016 than in 2015. The S&P500 should reduce the number of outstanding shares, on a net basis, by over 2% this year…”

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Sam Ro is managing editor at Yahoo Finance.
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