A slowing US economy could well see many previously unloved stocks come to the fore. In this week’s update, we also explain the folly of extrapolating the weaker economy onto share prices.
Technology stocks once again experience volatility, despite better-than-expected profits at Nvidia. We suggest that the broader technology space should not be ignored, particularly around infrastructure.
We then pick up Keir Starmer’s rhetoric of this week, preparing us for a painful time, tax-wise. Finally, and in a change to our normal formatting, we are identifying some areas of investment planning which may be attractive, subject to one’s individual circumstances. We have had a number of requests for people to maximise their pension allowances.
Hope you enjoy the read.
On this week’s agenda:
- What does a slowing US economy mean for corporate earnings
- Nvidia records bumper profits, but the share price falls
- Looking at AI and beyond the Magnificent Seven
- “There’s a Budget coming in October and it’s going to be painful”
- What do we recommend at Blue Sky?
- Summary
What does a slowing US economy mean for corporate earnings
US recession fears were, in part, a catalyst for the recent pullback in markets but as JPMorgan points out, it’s important to remember that the likes of the S&P 500 are not the economy.
At face value, a slowing economy would appear not to be good news. Yet the view of many equity analysts is to expect a broadening in US profit growth after several quarters of dominance by the Magnificent Seven technology stocks.
Over 2023 and the first half of 2024, only a handful of stocks in the S&P 500 index saw their earnings grow. The Magnificent Seven companies grew their profits 31% year-on-year in 2023 as global technology demand surged, whereas earnings in the rest of the S&P 500 contracted.
Continues…
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Risk warning
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.
