(Bloomberg) — This year’s furious U.S. stock market rally is poised to extend into the latter part of 2024, even as the U.S. presidential election threatens to be a major wildcard, the latest Bloomberg Markets shows Live Pulse Survey.
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The S&P 500 Index will approach 6,000 by the end of the year – a record 2.3% above Friday’s close – based on the average estimate of 411 survey participants. Three-quarters of respondents expect this earnings season to boost the benchmark, and the strength of Corporate America’s results is seen as more important to stock market performance than who wins the November vote or even the Federal Reserve’s policy trajectory.
U.S. stocks face a major earnings hurdle this week, with about 20% of S&P 500 members set to release results, including heavyweights Tesla Inc. and IBM Corp. About 70 companies in the gauge have already reported, with 76% announcing earnings that exceeded expectations. , according to data from Bloomberg Intelligence.
After Tesla, the other so-called Magnificent Seven members will report later this month. These tech giants – Apple Inc., Microsoft Corp., Alphabet Inc., Amazon.com Inc., Nvidia Corp. and Meta Platforms Inc. – have driven most of the stock rally since last year. But they lagged last quarter as the Fed cut rates for the first time since 2020, supporting sectors like financials and utilities.
Pollsters expect the technology giants to take the lead again. A combined 75% expect the Magnificent Seven to beat or perform in line with the rest of the market this quarter, after the group started October with a 0.9% decline. One reason investors remain optimistic is that most of the S&P 500’s earnings growth still comes from the Magnificent Seven.
“Catching up in the Magnificent Seven after a lackluster quarter is an attractive trade to watch right now,” said Anastasia Amoroso, chief investment strategist at iCapital.
The average survey respondent expects the S&P 500 to end the year at 5,977, up from Friday’s close of about 5,865. That would extend the index’s 23% gain through 2024, which has taken the index to 47 record highs, including two last week.
The historical median of S&P 500 returns from mid-October through December 31 is roughly 5%, according to data from Goldman Sachs Group Inc.’s trading desk. dating back to 1928. In election years this percentage is even higher, at about 7%.
Revenue first
The optimism about U.S. stocks from pollsters comes as the race between Vice President Kamala Harris and former President Donald Trump is at a razor’s edge, with polls showing the candidates largely neck-and-neck.
There has been talk lately of a supposed rebound in trading expected to benefit from a victory by Trump, the Republican candidate, including in Bitcoin and shares of Trump Media & Technology Group Corp. However, the largest share of respondents – 45% – said the strength of earnings is most important for their stock portfolios, compared to 39% who pointed to the election outcome and 16% on the extent of Fed easing.
“I know the election brings a lot of emotion depending on whether someone’s candidate wins or not, but don’t let that spill into your portfolio,” said Brian Spinelli, co-chief investment officer at wealth advisory firm Halbert Hargrove.
One event tech stock watchers will focus on is Nvidia’s earnings, which will be announced in November. The company’s latest report sent the chipmaker’s shares tumbling in subsequent days. This time, the largest group of respondents, 45%, see the results pushing the shares higher. Nvidia has led the AI technology boom, with its stock nearly tripling this year.
While pollsters are showing a lot of enthusiasm around technology, they expect the financial sector to take the lead in the S&P 500 this quarter.
Read more Banks posted strong gains, sending stocks above 2023 levels
That outcome is playing out until now. The sector rose 5% in October, the largest of the 11 S&P 500 groups, buoyed by strong earnings data on Wall Street. Bank stocks tend to do well when the Fed cuts rates, which will stimulate lending and other economic activity.
The MLIV Pulse survey was conducted Oct. 14 through 18 among Bloomberg News terminal and online readers around the world who chose to participate in the survey, and included portfolio managers, economists and retail investors. This week we wonder what impact the US elections will have on your wallet. Share your opinion here.
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