There's a dislocation between sentiment and fundamentals, says Morgan Stanley's Andrew Slimmon

Market Sentiment & Fundamentals - The market is acting rationally by rewarding companies with the best fundamentals, particularly large companies focused on AI, where the best earnings revisions are occurring [4] - Corporate earnings have been strong this year, but sentiment isn't as high as expected, suggesting a dislocation between sentiment and fundamentals [4] - Concerns and a lack of excessive giddiness in the market are positive signs, indicating that the bull market hasn't reached its final, euphoric stage yet [7][8] - While there are some signs of euphoria, such as the return of meme stocks and SPACs, sentiment polls surprisingly show more bears than bulls [9][10] Company Performance & Valuation - Nvidia trades at approximately 59 times its historical earnings, about 150% of the overall NASDAQ's level [2] - Stock prices are forward-looking, focusing on future earnings potential rather than past performance [3] - Earnings estimates are generally increasing, contributing to a bright outlook for stocks [3] Investment Strategy - Sticking with companies that are producing results is a great opportunity for investors, as many are distracted by other factors [11] - Investors should focus on fundamentals and block out the noise, including issues in Washington DC [5][6] - The eventual pulling in of sidelined investors will lead to a euphoric stage [8]