According to Deutsche Bank, a favorable macroeconomic environment and a surge in the technology sector's vitality are set to bolster US corporate earnings for the second quarter, potentially exceeding already lofty market expectations.
A team of strategists led by Binky Chadha wrote that a significant rebound in global manufacturing PMI, rising oil prices, a weaker US dollar, coupled with rapid profit growth in artificial intelligence-related businesses, are collectively driving forces. These factors could propel the year-on-year earnings growth rate for US-listed companies to 29.3%, which is approximately 3 percentage points higher than the current market consensus.
Institutional earnings guidance for the second quarter is overwhelmingly optimistic overall, leading the market to revise upward its consensus earnings growth expectation for the S&P 500 index to 26.2%. This figure not only surpasses the four-year peak of 25.2% seen in the first quarter but is also double the highest earnings season expectation recorded during previous non-recessionary recovery cycles.
Market consensus holds that the technology sector will continue to lead earnings growth: the semiconductor segment's growth rate has surged substantially, contributing 11 percentage points to the overall earnings growth; other major tech giants contribute 6 percentage points; the remaining sectors of the S&P 500 collectively contribute 9 percentage points.
The strategists assess that, in the current market environment, US stock returns during the earnings season are likely to approach historical averages. The S&P 500 index is currently showing modest gains, and market equity positioning is near neutral levels. Historical data indicates that during earnings seasons, this benchmark index has posted gains in 75% of periods, with an average increase of 2%.
From a medium-term perspective, current market positioning levels are significantly below the appropriate levels warranted by the impressive earnings growth and optimistic expectations, suggesting that US stock market performance has the potential to strengthen further in the future.
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