Thursday, 11 July 2024 Reading time : 2 minutes

The rally in US equities seems to know no limits, with the S&P 500 hitting new highs almost every day this week. Since the beginning of the year, the index has posted a total return of 19%. Whether these highs are justified will become clear in the coming weeks as the second quarter earnings season begins on Wall Street this Friday. As usual, the big banks will kick off the reporting season, led by JPMorgan Chase. 

Expectations for the stock market heavyweights are high. According to data provider Factset, analysts are forecasting an aggregate earnings growth of 8.8% year-on-year for the S&P 500 companies. If they are right, this will be the fourth consecutive quarter of rising profits. 

The stock market rally continues to be driven by investor enthusiasm for artificial intelligence. The euphoria is most evident in Nvidia's share price performance: at the end of 2023, the stock cost USD 49.50; since then, the price has more than doubled and the stock is currently trading around USD 130.00. Expectations for the chipmaker's earnings development are equally high. According to Factset, earnings per share are expected to rise to $0.64 in the second quarter, up from $0.27 in the same quarter last year – more than double. The bar is not quite as high for tech giants Meta Platforms and Alphabet, but the forecasts also point to significant earnings jump in the second quarter.

The performance of these companies in the second quarter is likely to be a key determinant of stock market sentiment, as the boom on equity markets is largely being driven by a handful of technology stocks, according to analysis by Bloomberg. Six names alone account for two-thirds of the S&P 500's year-to-date gains: Nvidia, Microsoft, Alphabet, Amazon, Meta Platforms and Apple. 

Investment ideas

8.00% p.a. BRC on Microsoft, Apple, Alphabet
Valor 135 803 82
Termsheet

17.00% p.a BRC on Nvidia, Meta Platforms und Alphabet
Valor 135 803 894
Termsheet

Indicative terms

 

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