Despite concerns of a potential summer correction in the stock market, respondents to Bloomberg’s Markets Live Pulse survey are optimistic about the upcoming corporate earnings season and its impact on the S&P 500 Index. As companies like Tesla Inc. and Google-parent Alphabet Inc. prepare to report their earnings, nearly two-thirds of the 463 survey participants believe that earnings will drive the US equities benchmark higher. Additionally, half of the respondents expect Corporate America’s performance to improve in the coming months compared to the first half of the year.
At JPMorgan Chase & Co.’s trading desk, US Market Intelligence head Andrew Tyler is bullish on the earnings outlook for the so-called Magnificent Seven technology stocks, which include companies like Nvidia Corp., Apple Inc., and Amazon.com Inc. Analyst estimates suggest that these tech giants are poised to deliver strong earnings growth of around 30% for the second quarter of the year.
Positive earnings results are seen as a much-needed boost for US equities, especially as the S&P 500 has started to plateau after a strong first half of the year. Concerns about stretched valuations, particularly in the technology sector, have made some investors cautious. Around 70% of survey respondents indicated that they have no plans to increase their exposure to US big tech stocks in the second half of the year.
Despite recent market declines, some experts like Michael Sansoterra, chief investment officer at Silvant Capital Management, remain optimistic about the future of tech stocks. Sansoterra believes that companies in the artificial intelligence space are continuing to invest, which could drive tech stocks higher in the long run.
While earnings are expected to play a stabilizing role in the market, some analysts like Kevin Gordon, senior investment strategist at Charles Schwab & Co., are cautious about the potential impact. Gordon believes that the market may see more modest gains as the earnings cycle matures. Dave Mazza, CEO at Roundhill Investments, also emphasizes the high bar for tech companies to deliver exceptional results that could offset recent market corrections.
As the US presidential election draws closer, survey participants seem unfazed by the potential impact of political outcomes on their equity positioning. Historically, the second half of election years has been favorable for the S&P 500, with the benchmark index posting positive returns in the third quarter of election years.
Overall, despite concerns about market volatility and stretched valuations, market participants are hopeful that strong corporate earnings will help drive the S&P 500 higher in the coming months. While challenges and uncertainties remain, the general sentiment is cautiously optimistic as investors await the latest round of earnings reports.
