It’s a big week for news from corporate America.
Earnings season is in full bloom, with roughly half of the companies in the S&P 500 index having reported their first-quarter earnings by now—and another one-third reporting this week.
So far, the news is good: Despite some signs of slowing economic growth last week, the S&P companies beating earnings estimates have done so by an impressive 9.1% on average—significantly higher than we’ve seen in recent quarters (see the chart).
S&P 500 Earnings Surprise by Quarter
Source: Bloomberg, calculations by Horizon Investments, as of 4/29/24
That strength, which investors appear to have increasingly come to expect, has helped buoy equity prices in the wake of the relatively weak GDP report, persistently sticky inflation, and a sharp rise in interest rates that have worried some investors. Both the S&P 500 and the Nasdaq posted big gains last week.
This week, we’ll see results from bellwethers Amazon and Apple as well as some key firms in the AI space (along with plenty of others). Strong earnings have served as a much-needed confidence booster for equity investors, especially given the increased possibility that inflation may prevent the Fed from cutting short-term interest rates soon. By this time next week, we’ll have an even clearer picture of corporate America’s health.
Meanwhile, we remain positive on the economy’s prospects. Although GDP growth was lower than expected during the first quarter, that outcome resulted largely from a wider trade deficit and a weaker buildup of inventories—not because consumers ran into trouble. Indeed, consumer spending during the quarter grew at a strong rate of 2.5%. In short, we believe the foundation for the economy’s growth remains healthy.
The S&P 500 or Standard & Poor’s 500 Index is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies. The Nasdaq 100 Index is a stock index of the 100 largest companies by modified market capitalization trading on Nasdaq exchanges. Index information is intended to be indicative of broad market conditions. The performance of an unmanaged index is not indicative of the performance of any particular investment. Individuals cannot invest directly in any index. Information obtained from third party sources is believed reliable but has not been vetted by the firm or its personnel.
This commentary is written by Horizon Investments’ asset management team. Past performance is not indicative of future results. Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. This report does not attempt to examine all the facts and circumstances that may be relevant to any company, industry, or security mentioned herein. We are not soliciting any action based on this document. It is for the general information of clients of Horizon Investments, LLC (“Horizon”). This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any analysis, advice, or recommendation in this document, clients should consider whether the security in question is suitable for their particular circumstances and, if necessary, seek professional advice. Investors may realize losses on any investments. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. All investing involves the risk of loss.
The investments recommended by Horizon Investments are not guaranteed. There can be economic times when all investments are unfavorable and depreciate in value. Clients may lose money. This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. The opinions expressed herein are our opinions as of the date of this document. These opinions may not be reflected in all of our strategies. We do not intend to and will not endeavor to update the information discussed in this document. No part of this document may be (i) copied, photocopied, or duplicated in any form by any means or (ii) redistributed without Horizon’s prior written consent. Forward-looking statements cannot be guaranteed. Other disclosure information is available at www.horizoninvestments.com.
Horizon Investments and the Horizon H are registered trademarks of Horizon Investments, LLC
©2024 Horizon Investments, LLC.
