More gains ahead for US stocks?
1Digest
This podcast episode delves into the recent rally in the S&P 500, examining the factors contributing to its growth. The discussion highlights the role of earnings growth and valuation expansion, driven by strong economic data, the performance of mega-cap tech stocks, and the potential for further earnings growth. The podcast also explores the upcoming third-quarter earnings season, discussing expectations and investor focus on earnings growth and potential revisions to 2025 earnings estimates. The episode further examines investor sentiment and potential risks to the market, including concerns about inflation, the Fed's interest rate policy, and the impact of geopolitics. The podcast concludes by analyzing the potential impact of the upcoming election on the market, highlighting the historical pattern of market volatility leading up to elections and the potential for a rally after the election.
Outlines
S&P 500 Rally and Future Outlook
This podcast episode discusses the recent rally in the S&P 500, driven by earnings growth and valuation expansion. The episode explores the factors contributing to this growth, including the strength of the economy, the performance of mega-cap tech stocks, and the potential for further earnings growth.
Earnings Growth, Valuation, and Market Risks
The podcast delves into the drivers of the S&P 500 rally, highlighting the role of earnings growth and valuation expansion. The discussion emphasizes the importance of strong economic data and the performance of mega-cap tech stocks. The episode also explores potential risks to the market, including inflation, the Fed's interest rate policy, and geopolitical events.
Third Quarter Earnings Season and Investor Sentiment
The podcast focuses on the upcoming third-quarter earnings season, discussing expectations and investor focus. The discussion highlights the importance of earnings growth and the potential for revisions to 2025 earnings estimates. The episode also explores investor sentiment and the potential impact of the upcoming election on the market.
Election Impact and Future Outlook
The podcast examines the potential impact of the upcoming election on the market. The discussion highlights the historical pattern of market volatility leading up to elections and the potential for a rally after the election.
Keywords
Magnificent Seven
The term "Magnificent Seven" refers to the seven largest companies in the S&P 500, which have significantly outperformed the broader market in recent years. These companies are often characterized by their large market capitalization, strong growth, and high valuations.
AI Infrastructure
AI infrastructure refers to the hardware, software, and services that support the development and deployment of artificial intelligence technologies. This includes data centers, computing power, and specialized hardware like GPUs.
Earnings Surprise
An earnings surprise occurs when a company's reported earnings exceed or fall short of analysts' expectations. A positive earnings surprise can boost a company's stock price, while a negative surprise can lead to a decline.
Market Breadth
Market breadth refers to the number of stocks participating in a market rally or decline. A broad market rally indicates that a large number of stocks are rising, while a narrow rally suggests that only a few stocks are driving the market higher.
Geopolitical Risk
Geopolitical risk refers to the potential for political events or conflicts to impact financial markets. This can include wars, trade disputes, and political instability.
Corporate Buybacks
Corporate buybacks occur when a company repurchases its own shares from the open market. This can increase the value of remaining shares and boost earnings per share.
Q&A
What are the primary drivers of the recent S&P 500 rally?
The rally has been driven by a combination of earnings growth and valuation expansion. Strong economic data, the performance of mega-cap tech stocks, and the potential for further earnings growth have all contributed to this upward trend.
What are the key concerns for investors regarding the market's future outlook?
Investors are concerned about inflation, the Fed's interest rate policy, and the impact of geopolitics. These factors could potentially lead to a decline in valuations and a slowdown in earnings growth.
What is the potential impact of the upcoming election on the market?
Historically, the market tends to experience volatility leading up to elections, with a potential rally after the election. The outcome of the election could impact investor sentiment and the market's direction.
What is the biggest risk to the current market forecast?
The biggest proximate risk is undoubtedly geopolitics. While the US economy appears strong, geopolitical events could significantly impact market sentiment and economic activity.
What is the outlook for corporate buybacks in 2025?
Corporate buybacks are expected to be a significant source of demand for equities in 2025, with a forecast of $1 trillion in net buying from corporates. This trend is expected to continue, driven by strong corporate earnings and a favorable economic environment.
Show Notes
The S&P 500 has staged a remarkable rally since the start of the year. How much more upside should investors expect — and what could drive those gains? Goldman Sachs Research’s David Kostin and Ryan Hammond from the US portfolio strategy team explain the drivers and risks to their year-end and 12-month targets for US equities.
Table of contents
United States
