Sixty-six% of S&P 500 companies that have reported results topped sales forecasts last quarter, up from 62% in the previous period, a sign that demand may take over from cost cutting as a driver of profits, according to data compiled by Bloomberg.
Revenue has "surprised to the upside in these last several quarters," Duessel said. "Sales are going to be propelled by employment."
Buybacks, Dividends
The recovery in demand is spurring executives to spend the record $940 billion in cash they built up after the financial crisis. S&P 500 companies authorized 38% more buybacks in 2011 than a year earlier and dividends may increase to a record $31.07 a share in 2013, data compiled by Birinyi Associates Inc. and Bloomberg show.
That's boosting confidence among mutual fund investors who sold shares during most of the bull market. U.S. equity funds attracted about $12 billion of inflows since December, compared with $134 billion of redemptions during the previous six quarters, according to Investment Company Institute data compiled by Bloomberg.
Individual investors "are way underweight equities," said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $550 billion and boosted stock holdings in April 2009. "The market is nowhere even close to being priced to perfection."