Market Quote: U.S. Earnings Beats, U.S. Congress Critique
Author: The editor's desk
February 7, 2024
A mid-week analysis of what’s happening in global financial markets from the perspective of AGF’s investment management team.
Narrowing Up
Roughly two-thirds of the S&P 500 Index’s market capitalization had reported quarterly earnings as of the end of last week, with 70% beating on consensus earnings per share (EPS) estimates and 65% on sales, according to Bloomberg. Most notably, some of the more significant beats by mega-cap growth companies drove U.S. equity markets higher, despite U.S. 10-year yields rising back above 4.0% on strong economic releases and the U.S. Federal Reserve rate cut expectations getting pushed later into 2024.
Under the surface, however, the equity market narrowness of 2023 has continued this year, with the six largest stocks contributing over 70% of the S&P 500’s year-to-date gains. Large-cap growth stocks and technology names continue to dominate smaller-cap, high-beta, value and defensive areas of the market.
February is historically the second worst month for U.S. equity markets, with the latter half especially weak. Markets may remain volatile near-term as inflation continues to fall while economic indicators and corporate earnings remain resilient, but we expect them to broaden out as we move through 2024.
Politically Incorrect?
There’s an argument to be made that the financial markets can live with another Donald Trump presidency, but he made it clear this weekend that investors will have to watch him warily after saying he’s prepared to potentially raise tariffs on Chinese goods coming into the U.S. to 60% and that he would fire U.S. Federal Reserve Chair Jerome Powell, whose current term doesn’t expire until 2026.
Meanwhile, U.S. Congress is about to kill a border reform bill that had overwhelming support just weeks ago. The big impact isn’t on immigration policy, which will remain dysfunctional; the big impact will be on Ukraine, Israel, Taiwan and other countries that were promised U.S. aid that isn’t coming.
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The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds, or investment strategies.
Commentary and data sourced from Bloomberg, Reuters and other news sources unless otherwise noted. The commentaries contained herein are provided as a general source of information based on information available as of February 7, 2024 and are not intended to be comprehensive investment advice applicable to the circumstances of the individual. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Market conditions may change and AGF Investments accepts no responsibility for individual investment decisions arising from the use or reliance on the information contained here.
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Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. Our companies deliver excellence in investing in the public and private markets through three business lines: AGF Investments, AGF Capital Partners and AGF Private Wealth.
AGF brings a disciplined approach, focused on incorporating sound, responsible and sustainable corporate practices. The firm’s collective investment expertise, driven by its fundamental, quantitative and private investing capabilities, extends globally to a wide range of clients, from financial advisors and their clients to high-net worth and institutional investors including pension plans, corporate plans, sovereign wealth funds, endowments and foundations.
Headquartered in Toronto, Canada, AGF has investment operations and client servicing teams on the ground in North America and Europe. AGF serves more than 800,000 investors. AGF trades on the Toronto Stock Exchange under the symbol AGF.B.
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