Market veteran: Two major data releases this week are expected to ignite a new round of gains in the US stock market!

President and Chief Investment Strategist Ed Yardeni of Yardeni Research expects that this week, as investors digest two key economic data points and the arrival of second-quarter earnings reports, the stock market rally will continue. The company's report on Monday pointed out that the upcoming release of second-quarter Gross Domestic Product (GDP) and June Consumer Expenditure Price Index (PCE) are crucial for the stock market's continued rebound.

Yardeni stated in the report, "We expect that the robust second-quarter GDP growth to be announced on Thursday, along with the moderate June PCE inflation data to be released on Friday, will keep the stock market on an upward trajectory."

According to economists' expectations, the US second-quarter GDP growth rate is projected to reach 1.9%, and core PCE in June is expected to increase by 2.5% year-on-year, not far from the Federal Reserve's long-term inflation target of 2%.

If the economic data meets expectations, this will continue to support the prospect of a soft landing for the US economy and give the Federal Reserve more reasons to cut interest rates at the September policy meeting.

Some bearish investors on US stocks believe that the market is overvalued, making it difficult for the rally to sustain. They view the stock market as being in a bubble similar to the dot-com era, but Yardeni disagrees with this view.

He believes that the current record-breaking rally in US stocks is supported by company earnings, unlike 24 years ago.

"We acknowledge that the current stock market rally is reminiscent of the collapse caused by overvaluation in the 1990s. However, we also note that the current bull market is more supported by company earnings," Yardeni said.

The research firm emphasized that the information technology and communication services sectors account for approximately 41% of the S&P 500 Index (SPX) (blue line in the chart below), close to the peak in 2000.

During the peak of the dot-com bubble, the returns of these two sectors were less than a quarter of the S&P 500 Index, but now, the returns of these two technology-focused sectors represent one-third of the expected earnings per share of the S&P 500 Index (red line in the chart below).

Yardeni is encouraged by the fact that earnings for the second quarter of US stocks have already begun to materialize.

Data from Fundstrat shows that as of now, 16% of S&P 500 Index component companies have reported second-quarter earnings, with 84% of companies exceeding profit expectations, with a median surprise of 4%, and 63% of companies exceeding revenue expectations, with a median surprise of 3%.

Yardeni said, "So far, the second-quarter earnings season for US stocks is progressing well. The expected blended earnings growth rate for the S&P 500 Index (SPX) has halted its recent decline, rising to 8.2% in the week of July 18. We expect a growth rate of 10%-12% annually." Looking ahead, Adrian expects S&P 500 index's earnings per share to increase significantly in the coming years.

He said, "We expect the earnings per share of the S&P 500 index to be $250, $270, and $300 in 2024, 2025, and 2026 respectively. Compared to industry analysts' consensus, we are more optimistic about the S&P 500 index this year, but not as optimistic about the next two years."

Adrian maintains his long-term bullish stance on US stocks, stating, "We still believe that the earnings per share of the S&P 500 index will reach $400 by the end of this decade."

Finally, Adrian emphasized that the company's profit margin continues to rise, nearing historical highs, indicating that the profits and economic growth in the second and third quarters will continue to leave a deep impression