Soaring Stocks: The Unstoppable Rise of the US Equity Market

The US stock market is poised to continue its remarkable rally, defying expectations and reaching new heights in the final stretch of 2024. Despite the looming US presidential election, which many view as a potential wild card, the latest Bloomberg Markets Live Pulse survey suggests that the strength of corporate earnings will be the driving force behind the market's performance.

Earnings Surge Fuels Bullish Outlook

Magnificent Seven to Lead the Charge

The survey participants anticipate that the so-called "Magnificent Seven" tech giants, including Apple, Microsoft, Alphabet, Amazon, Nvidia, and Meta Platforms, will regain their leadership position in the market. After a lackluster previous quarter, these behemoths are expected to outperform or at least match the broader market's performance this earnings season. Investors remain bullish on the Magnificent Seven, as they continue to account for a significant portion of the S&P 500's earnings growth.

Financials Poised for Outperformance

While the tech sector is expected to shine, survey respondents also see financials as a leading sector in the upcoming quarter. The financial sector has already gained 5% in October, outpacing the other 11 S&P 500 groups. This performance is attributed to the strong earnings reported by Wall Street firms, which tend to benefit from the Federal Reserve's interest rate cuts, as they can boost borrowing and economic activity.

Earnings Season Holds the Key

The upcoming earnings season is seen as a crucial hurdle for the US stock market, with roughly 20% of S&P 500 companies scheduled to release their results, including industry heavyweights like Tesla and IBM. The survey participants are optimistic, with three-quarters of them expecting this earnings season to provide a boost to the benchmark index. The strength of corporate America's results is viewed as more important for the stock market's performance than the outcome of the presidential election or the Federal Reserve's policy decisions.

S&P 500 to Reach New Heights

Based on the median estimate from the 411 survey participants, the S&P 500 Index is expected to approach the 6,000 mark by the end of the year, representing a new record high and a 2.3% increase from the current level. This would extend the index's impressive 23% gain in 2024, which has already seen it reach 47 record closing highs, including two last week.

Nvidia's AI Boom Fuels Optimism

One event that tech enthusiasts will be closely watching is Nvidia's upcoming earnings release in November. The company's last report had a significant impact on its stock price, and this time, the largest group of survey respondents (45%) expect the results to push the stock higher. Nvidia has been at the forefront of the AI technology boom, with its stock almost tripling in value this year.

Election Outcome Matters, but Earnings Take Priority

While the US presidential election is looming as a potential wild card, the survey participants place more emphasis on the strength of corporate earnings. The largest group of respondents (45%) said the strength of earnings is the most crucial factor for their equity portfolios, compared to 39% who pointed to the election outcome and 16% who cited the magnitude of Federal Reserve easing.As the US stock market continues its remarkable ascent, investors remain focused on the fundamental drivers of the rally, with corporate earnings taking center stage. The Magnificent Seven tech giants, the resilient financial sector, and the ongoing AI revolution are all expected to play a pivotal role in propelling the market to new heights, even as the political landscape adds an element of uncertainty.