The big things you need to know: First, 2Q24 earnings season is ending up solid. With most reports in, we highlight a few of the most interesting charts in our deck on earnings right now. Second, other updates on our high frequency indicators were generally positive for US equities and mixed for the rotation trade. We end the summer of 2024 with increased conviction that August 5th was the low in the recent pullback, even if some choppiness seems likely to be there to greet us when we return in September, and feeling good about our 5,700 YE 2024 S&P 500 price target.
If you’d like to hear more, here’s another five minutes.
Let’s start with Takeaway #1: 2Q24 Earnings Season Is Ending Up Solid
Last week’s relative calm in earnings allowed us to see how a few stats that we don’t watch closely on a week-to-week basis have evolved. Here’s what jumped out:
g chart to us highlights how R:
- A second highlights how stable bottom-up EPS forecasts for the S&P 500 have been and how unusual that is. That hasn’t been the case within the S&P 600, however.
- In that highest quality part of the Small Cap segment of the US equity market, the decline in bottom-up EPS forecasts has been in line with the median cut over time.
- A third takes a look at trends in layoff discussions in the media vs. earnings calls. There’s always a gap, but that gap has widened in recent years. This is a good reality check about the state of the labor market, in our opinion.
- It’s also worth noting that in terms of company commentary, last week’s reporters left us remembering how, during COVID and its immediate aftermath, many companies talked about demand that was delayed, not destroyed. We think things may be similar today because of interest rates. While a few more companies will report later this month, our overall assessment of the 2Q24 reporting season is that it was solid.
Moving on to Takeaway #2: Other Updates From Our High Frequency Indicators Have Generally Been Positive for US Equities & Mixed for the Rotation Trade
- On the broader market,
- Net bullishness remains in neutral territory on the weekly AAII survey, despite the rebound in the S&P 500 over the past few weeks.
were intrigued to find that R:
and the R:
- The improvement was driven in part by better sentiment among Democrats and Independents, which was offset by worse sentiment among Republicans.
- On the rotation trade, where Growth has bounced back,
- Though valuations remain more compelling in Value and positioning remains extended in Growth per CFTC data,
- EPS revisions have been stronger in Growth, including the top 10 names. The great debate over the fate of the rotation trade seems likely to rage on this fall.
- Valuation doesn’t settle the score. The median P/E of the top 10 names in the S&P 500 has rebounded to 26.6x but remains well below recent highs.
That’s all for now. Thanks for listening. And be sure to reach out to your RBC representative with any questions.
