Broad-Based Growth in Focus as Wall Street Awaits Q4 Earnings

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Investors are closely monitoring technology companies and other key players to see if recent strong profit gains will continue and whether growth will extend to other sectors. This comes as corporate America gears up to report fourth-quarter results after another robust year for Wall Street.

Attention is also on what U.S. companies might say about the potential impact of proposed tariffs, deregulation, and tax policies under President-elect Donald Trump's incoming administration in 2025.

The fourth-quarter 2024 U.S. earnings season kicks off next week, with major banks like JPMorgan Chase and Wells Fargo set to release their results on Wednesday. Analysts project S&P 500 companies to post a 9.6% earnings increase for Q4 2024 compared to the same period in 2023, surpassing the 9.1% growth recorded in Q3 2024, according to data from LSEG.

The S&P 500 saw a 23% rise in 2024, marking a second consecutive year of gains exceeding 20%. This growth was driven by significant advancements in artificial intelligence, with companies like Nvidia and Microsoft leading the charge. The communication services and information technology sectors experienced the largest gains in 2024.

Despite a rocky start to 2025, the S&P 500 is trading at a forward earnings multiple of 21.5, higher than the 10-year average price-to-earnings ratio of about 18, LSEG data shows. "We've seen considerable multiple expansion over the past few years. Now we need profits to follow suit," said Anthony Saglimbene, chief market strategist at Ameriprise Financial.

Big technology companies face high expectations to deliver positive results. Saglimbene noted that broader sectors are also expected to show accelerating profit growth, which could begin with upcoming Q4 earnings.

While communication services and technology led 2024's earnings gains, financials are projected to post the highest Q4 2024 growth, with profits estimated to rise 17.5%. Looking ahead to 2025, profit growth is expected to widen, with healthcare and technology at the forefront, along with stronger performances in industrials, materials, and energy.

Stephanie Lang, chief investment officer at Homrich Berg, emphasized the expanding earnings growth, saying, "Growth rates are improving from 2024 to 2025, and the broadening of earnings is a positive development."

Market watchers are also eager for insights into potential policy changes under Trump, who takes office on January 20. Proposals like universal tariffs could raise consumer prices, while reduced regulation may boost earnings in sectors like financials. CNN recently reported that Trump is considering declaring a national economic emergency to justify broad tariffs.

"There’s significant uncertainty right now, and the timing and rollout of tariffs are critical," said Timothy Chubb, chief investment officer at Girard, a Univest Wealth Division. He added that insights from banks on deregulation will also be closely watched.

Additionally, uncertainty surrounding Federal Reserve interest rate cuts has increased focus on companies’ comments about consumer resilience and the strength of the U.S. economy, which has so far defied expectations of a slowdown.

 

 

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.