Earnings season for 3Q24 is well underway. For the S&P500, 181 companies have reported earnings as of Friday, with an average 4.4% YoY growth in earnings and Revenue. The Technology sector keeps growing strong at almost 4X the average. The laggard is the energy sector that still shows contraction with -28% earnings growth for the quarter. The numbers look healthy on average, although we know that the level of concentration is still very high. But there is another statistic we need to bear in mind: over the last 10 years, earnings per share for S&P500 have grown by 92%, while the index has grown by 202%. In other words, the market has gone ahead of itself with an air pocket of 100% of EPS. For the market to be adequately priced, we should see either an eps catch up to prices, or a price trading range, or decline, to earnings, in order to close that gap. We’re approaching the home stretch of 2024, with one of the best election years in history. As investors look ahead to 2025, it’s important to look at these metrics to position portfolios accordingly.
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