Here is Your Second Quarter Earnings Recap

This week I wanted to provide a quick recap of the key insights from the Second Quarter 2024 earnings season that may be relevant for you and your portfolio. Understanding these trends can help us make informed decisions and adjustments. Here are the main takeaways:

1.  Consumer Insights: While some narratives suggest that the health of the U.S. consumer is declining, it’s important to keep perspective. Lower-income consumer challenges have been highlighted in company commentaries, but this group doesn’t drive the overall market. Economic growth continues to support corporate profits, and as long as profits are expanding, the market remains on solid ground.

2. Overall Market Trends: Despite some volatility, earnings were strong this season. Year-over-year earnings growth is on track to reach 11%, surpassing the initial expectations of 9%. Nearly 56% of S&P 500 companies beat earnings expectations by more than a standard deviation. This broad-based strength and ongoing growth are positive signs for 2025.          

3. Broader Market and Liquidity: The market recently has been driven by sectors like Financials, Staples, and Utilities, which is encouraging from both technical and earnings perspectives. Additionally, the liquidity being injected into the market remains high, and with potential easing from the Federal Reserve, liquidity will likely stay plentiful.  Earnings season can by summed up as widespread strength, that has expanded outside of the Magnificent 7 stocks recently.  Here is a graph that shows the earnings of the Mag 7 compared to the rest of the S&P 500. 

Bottom Line: Worries about the health of the U.S. consumer appear to be overly pessimistic. Earnings are showing resilience, and with strong market support and high liquidity levels, the outlook remains positive. As always, we will continue to monitor these trends and adjust your portfolio to align with the evolving landscape.

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