The US stock market is expected to continue its upward trend during the third-quarter earnings season, driven by strong profit growth. Despite the anticipation of volatility due to the upcoming US presidential election and geopolitical tensions in the Middle East, investor confidence remains robust.
Analysts project a more moderate increase in S&P 500 earnings per share for the September quarter compared to the previous quarter, primarily due to lower oil and gasoline prices. However, the full-year earnings growth forecast for 2024 remains steady at 11%.
The US economy continues to demonstrate resilience, with overall economic activity remaining strong and a healthy labor market. The recent rate cuts by the Federal Reserve are expected to further support economic growth.
The "Magnificent 7" companies, which have been leading market gains, are expected to maintain healthy growth rates, driven by advancements in artificial intelligence.
Management guidance during the earnings season will be important for share-price performance, and a positive outlook is anticipated.
While current market valuations are considered high, they are viewed as reasonable given the favorable economic conditions. The positive outlook for US equities is supported by solid profit growth and advancements in AI. The S&P 500 price target for June 2025 is set at 6,200, reflecting confidence in the market's trajectory.
Investors are advised to focus on AI beneficiaries and high-quality stocks. Monitoring corporate performance and guidance during the earnings season will be crucial in shaping investor sentiment and market dynamics in the coming weeks.