Monday, 22 January 2024 Reading time : 3 minutes

The US earnings season is gathering pace and is likely to dominate stock market activity in the coming days and weeks. Wall Street experienced a bumpy start to the new year. In recent days, however, the S&P 500 has recovered and is now heading for a new all-time high, gaining 1.4% year-to-date. Investors are not only looking to earnings for clarity on how Corporate America is holding up, but they are also paying close attention to management's expectations for the year ahead.

According to the US data provider Factset, analysts' expectations for the annual earnings are muted. For the full year 2023, they are forecasting aggregate earnings growth of 0.6% for S&P 500 companies, well below the trailing 10-year average of 8.4% (2013 - 2022). However, in the final quarter of 2023, earnings are likely to grow by 2.4% year-on-year. Earnings growth is thus expected to be weaker than in the third quarter, when profits rose by 4.9%, but significantly better than in the first and second quarters, when earnings contracted by 1.7% and 4.1%, respectively.

Looking at individual sectors, earnings expectations for 2023 differ considerably. The consumer discretionary sector is expected to see profits soar by 43.9% compared to the previous year. The communications sector follows in second place, with earnings projected to rise by 23.4%, according to Factset data. By contrast, energy is likely to be the worst performing sector, with earnings expected to fall by almost 30% year-on-year.

In the ongoing earnings season, investors will pay particular attention to the group of the so-called «Magnificent Seven», which will release their figures starting from the end of January. Electric car maker Tesla is set to kick off with results on 24 January, followed by Microsoft, Alphabet and Amazon, Apple and Meta Platforms as well as Nvidia. The seven US stock market heavyweights together account for just under 30% of the market capitalisation of the S&P 500, according to calculations by US investment bank Goldman Sachs. Over the course of the year, the individual stocks have risen between 50% and 240% and, due to their dominance, have thus played a decisive role in the 2023 rally on US stock markets. How Wall Street performs this year will therefore largely depend on the strength of the «Magnificent Seven».

Looking ahead, analysts are quite optimistic for 2024. According to Factset data, S&P 500 earnings are projected to rise by 11.8% this year. The healthcare sector is expected to see the largest increase at 19.2%. However, companies will first have to prove themselves in the current earnings season – given the partly lofty expectations, investors should also be prepared for potential disappointments.

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Typ	Valor	Underlyings	Coupon p.a.	Barrier	Maturity	Currency	Subscription
BRC	130399238	S&P 500®	6.00%	69%	18	USD	01.02.2024
BRC	130399239	NASDAQ 100®	6.65%	69%	12	USD	01.02.2024

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