(Bloomberg) -- This year’s furious rally in US stocks is poised to extend into the final stretch of 2024, even as the US presidential election looms as a major wild card, according to the latest Bloomberg Markets Live Pulse survey.
Most Read from Bloomberg
A Broken Oil Pipeline Plunges South Sudan’s Capital Into Chaos
Drug Decriminalization Spawns a Political Debacle for Progressives
Cities Look to AI to Flag Residents’ Trash and Recycling Mistakes
One City’s Plan to Re-Link a Neighborhood That Robert Moses Divided
Chicago Should Consider Furloughs, Higher Booze Tax, Watchdog Says
The S&P 500 Index will approach 6,000 by year-end — a record milestone 2.3% above Friday’s close — based on the median estimate from 411 questionnaire participants. Three quarters of respondents expect this earnings season to give the benchmark a boost, and the strength of Corporate America’s results are seen as more crucial for the stock market’s performance than who wins the November vote or even the Federal Reserve’s policy path.
US stocks face a big earnings hurdle this week, with roughly 20% of S&P 500 members scheduled to release results, including heavyweights Tesla Inc. and IBM Corp. About 70 companies in the gauge have reported already, with 76% announcing earnings that surpassed estimates, according to Bloomberg Intelligence data.
After Tesla, the other so-called Magnificent Seven members report starting later this month. Those technology behemoths — Apple Inc., Microsoft Corp., Alphabet Inc., Amazon.com Inc., Nvidia Corp. and Meta Platforms Inc. — have driven the brunt of the equities advance since last year. But they trailed last quarter as the Fed cut interest rates for the first time since 2020, supporting sectors like financials and utilities.
Survey takers anticipate the tech giants will take the lead again. A combined 75% expect the Magnificent Seven to either beat or perform in line with the rest of the market this quarter, after the group started October with a 0.9% decline. One reason investors remain bullish is that the bulk of the S&P 500’s earnings growth still comes from the Magnificent Seven.
“The catch-up in the Magnificent Seven after a lackluster quarter is a compelling trade to look at right now,” said Anastasia Amoroso, chief investment strategist at iCapital.
The median survey respondent sees the S&P 500 ending the year at 5,977, up from Friday’s close of about 5,865. That would extend the index’s 23% gain in 2024, which has taken it to 47 record closing highs, including two last week.
The historical median of S&P 500 returns from mid-October to Dec. 31 is roughly 5%, according to data from Goldman Sachs Group Inc.’s trading desk going back to 1928. It’s even higher in election years, at about 7%.
Earnings First
Optimism around US equities from survey-takers comes as the race between Vice President Kamala Harris and former President Donald Trump is coming down to the wire, with polling showing the candidates largely neck and neck.
There’s been chatter lately about a supposed revival in trades that are expected to benefit from a victory by Trump, the Republican candidate, including in Bitcoin and shares of Trump Media & Technology Group Corp. However, the biggest chunk of respondents — 45% — said the strength of earnings matters most for their equity portfolios, compared with 39% pointing to the election outcome and 16% for the magnitude of Fed easing.
“I know the election brings a lot of emotion depending on whether one’s candidate wins or not, but don’t let that come into your portfolio,” said Brian Spinelli, co-chief investment officer at wealth advisory firm Halbert Hargrove.
One event that tech-stock watchers will be focusing on is Nvidia’s earnings, to be released in November. The company’s last report drove the chipmaker’s shares down in the following days. This time around, the biggest group of survey respondents, 45%, see the results pushing the stock up. Nvidia has been the poster child for the boom in AI technology, with its stock almost tripling this year.
While poll-takers show plenty of enthusiasm around tech, there’s another area that they anticipate will lead the S&P 500 this quarter: financials.
Read More Banks Put Up Strong Earnings, Pushing Stocks Beyond 2023 Levels
That result is playing out so far. The sector is up 5% in October, the most among the 11 S&P 500 groups, buoyed by strong earnings from Wall Street. Bank stocks tend to do well when the Fed cuts rates, which stands to boost borrowing and other economic activity.
The MLIV Pulse survey was conducted Oct. 14-18 among Bloomberg News terminal and online readers worldwide who chose to engage with the survey, and included portfolio managers, economists and retail investors. This week, we ask how the US election will impact your wallet. Share your views here.
Most Read from Bloomberg Businessweek
AI Detectors Falsely Accuse Students of Cheating—With Big Consequences
Neuralink Co-Founder’s New Startup Sells a Brain Computer Toolkit
©2024 Bloomberg L.P.