With two-thirds of the S&P 500 Index constituents reporting, fourth quarter earnings are coming in with better than expected growth. Top line sales growth across 334 companies is averaging 3.9% y/y and earnings per share are averaging 5.1% y/y.
Source: Bloomberg as of 02/09/2024
A few sectors are outearning the rest of the market, including technology, consumer discretionary, and communications. Fundamental growth continues to fuel the Magnificent 7, which as a group have seen their stock price soar 12.4% in 2024 compared to 5.5% for the S&P 500 Index.
For calendar year 2024, the consensus earnings forecast from Wall Street strategists is for $243 per share, or +10.5% versus 2023. As the U.S. economy continues to chug along, that forecast is starting to look more realistic. But how much of this year’s growth is already priced into the market? From a valuation perspective, the forward 12-month P/E ratio for the S&P 500 Index is 20.3, well above the 5-year average (18.9) and the 10-year average (17.7).
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