S&P 500's march to 8,000 hinges on 'very, very strong' third quarter
SPY•Analysts and portfolio managers are skeptical the S&P 500 will reach 8,000, despite expectations for 30.6% third-quarter earnings growth. Excluding the Magnificent Seven, technology and energy firms, earnings growth is estimated at 5%, while 62% of index components traded below their 50-day moving averages.
1. High expectations for earnings
The S&P 500 has remained close to 8,000 since its midsummer rally, but analysts and portfolio managers questioned whether strong third-quarter results would be enough to push it higher. Julien Lafargue of Barclays Private Bank said companies would need to deliver “very, very strong results.” Oil has climbed above $105 a barrel from $84 since the last earnings season, and the 10-year Treasury yield has reached its highest level since 2002. November’s midterm elections and questions about the AI boom are adding uncertainty.
2. Growth concentrated in megacaps
S&P 500 earnings are expected to grow 30.6% year over year in the third quarter. Excluding the Magnificent Seven, technology and energy firms, earnings for the rest of the index are expected to grow 5%, down from 14% in the previous quarter, HSBC estimated. Meanwhile, 62% of S&P 500 components traded below their 50-day moving averages.
3. Investors show caution
RBC Capital Markets cut its US technology allocation to “market weight” and rotated into healthcare, while Citigroup dropped its “overweight” call on US equities, saying its indicators had reached levels historically seen at market peaks. The S&P 500 is up 13% this year. Some market strategists argued the bull market could continue, saying economic expansions and bull markets do not end on a set schedule.
