Next Monday (January 20), with Trump's formal return, the US stock market officially enters the "Trump 2.0 Era." Following this, on January 21,$Netflix (NFLX.US)$the Earnings Reports will be released first, officially kicking off the new earnings season for US tech stocks.
Looking ahead to this earnings season, global investors once again focus on the Magnificent 7 in the US stock market.$Apple (AAPL.US)$、$Microsoft (MSFT.US)$、$Alphabet-C (GOOG.US)$、$Amazon (AMZN.US)$、$NVIDIA (NVDA.US)$、$Meta Platforms (META.US)$and$Tesla (TSLA.US)$The market hopes to find clues as to when the huge investments in these companies will pay off.
According to the consensus expectations of Analysts, Futu has organized the market's performance forecasts for large technology stocks for the reference of mooers:
According to FactSet data, the EPS of the S&P 500 Index for the fourth quarter of 2024 is expected to grow by 11.9% year-on-year. If the actual figure reaches 11.9%, it will be the highest year-on-year profit growth since the fourth quarter of 2021, marking the sixth consecutive quarter of year-on-year profit growth for the index.
A Barclays researcher stated that the market consensus expectations indicate that, given the poor start to the year, technology stocks remain the core of EPS growth for the S&P 500 Index, with an anticipated EPS growth of 24% for large technology stocks in the fourth quarter of 2024; additionally, non-technology stocks have seen a downward revision of 300 basis points higher than the average before the Earnings Reports, and current market sentiment is leaning towards bearish.
It is expected that in the fourth quarter of 2024, other technology stocks will contribute approximately $7 to EPS (a year-on-year increase of 20%), while the remaining S&P 500 Index constituents will contribute about $39 (a year-on-year increase of 1%).
UBS Group's strategy report further states that the earnings growth of technology stocks in the fourth quarter will perform exceptionally well, especially for Internet Plus-Related companies; however, investors need to be mindful that the current valuations of technology stocks may be at a relatively high level. Therefore, although technology stocks will show strong profitability in the fourth quarter, the market's expectations for their stock prices will appear to be relatively conservative, which is also the reason for their recent weak performance in the market.
Meanwhile, as we enter 2025, Wall Street has also made projections for the performance of large technology stocks in 2025.
Recently, Lisa Shalett, Chief Investment Officer of Morgan Stanley, made a bearish statement regarding the performance of large Technology stocks in 2025. She stated that according to data compiled by Bloomberg, the combined profit growth of the "Magnificent 7" in the USA is expected to be 18% in 2025, down from an expected 34% in 2024. This indicates that the profit growth of these Technology giants will slow down, and they are likely to find it difficult to dominate the market again.
Excluding NVIDIA, the biggest beneficiary of the AI boom, the total profit of the other six companies is expected to grow by only 3% in 2025.
Interestingly, among Wall Street professionals, Lisa is not the only one who believes that the dominance of the "Magnificent 7" will ultimately come to an end. Bank of America analyst Savita Subramanian also warned that growth expectations for the giants are nearing historical highs, which is precisely when their profits are expected to slow down. Furthermore, firms like Goldman Sachs and Citigroup are urging clients to diversify their investments beyond the Technology giants.
In contrast, Capital Economics believes that the USA stock market will complete a 20% rally by 2025.
The report points out that the two major drivers continuing to push the bull market this year are similar to last year's: investor enthusiasm for AI and the exceptionalism of the USA economy; among them, the enthusiasm for AI investment is expected to further elevate the prices of large Technology stocks in the USA, especially through higher valuations; compared to the internet bubble period, the current PE ratio of USA stocks is still far below its peak, suggesting that there is still room for further gains in the USA stock market.
Moreover, another reason for the strong performance of the USA stock market is the solid foundation of the USA economy, which is expected to continue to outperform major developed economies in 2025, helping to improve corporate profit expectations.
In summary, facing the complex investment environment in 2025, the majority of current recommendations from Wall Street is: don’t put all your eggs in one basket. Diversification has become the consensus among major Institutions.
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