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Earnings growth in S&P 500 to broaden beyond Mag 7: Wells Fargo

A new chart from Wells Fargo shows the potential rebalancing of earnings growth in the S&P 500 (^GSPC). Seana Smith joins Asking for a Trend to give a closer look ahead of the second quarter earnings season.

Wells Fargo notes that earnings growth will broaden beyond the "Magnificent 7." They also expect to see more broadening in participation and profitability outside of tech and communication services. As the S&P 500 and Nasdaq (^IXIC) close at another set of record highs, the momentum should continue through the next year.

For more expert insight and the latest market action, click here to watch this full episode of Asking for a Trend.

This post was written by Melanie Riehl

Video transcript

A new chart from Wells Fargo showing the potential rebalancing of earnings growth in the S and P 500 Yah finances.

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Shana Smith joins me now with a closer look.

Sha Yeah, Josh, when you take a look at this So all a lot of the focus on Wall Street is gonna be shifting to earnings here when we kick off second quarter earnings season next week.

And I want to bring up the growth expectations that we got from Wells Fargo today because I think it's significant a lot of times when we're talking to strategists Uh, day in and day.

Our question is whether or not the narrow concentration within the market how big of a risk Maybe that poses to the broader market at this point.

And what we're seeing here in terms of those expectations from Wells Fargo, is that we are going to see more of a broadening in terms of that earnings growth.

It's not only going to be technology and communication services, which it very much has been driving the earnings growth, as you can see going back to the third quarter of last year and through the first quarter of 2024.

But as you look ahead to the second quarter and even through just over the next year, obviously we are starting to see in terms of those forecast expectations, we are expecting to see more of a broadening out in terms of the participation profitability that we are seeing beyond tech and communication services.

And the reason why this is so significant is because this really supports so many of the calls that we have gotten most recently about arguing about the fact that hey, we're even though we're at record highs close today at another record high for the S and P and the NASDAQ, we still see this momentum continuing and and that is a lot of that really driven by the strong earnings growth that we have seen, but also what we are forecasting to see in terms of that forward earnings growth over the next 12 months.

So again, a broadening out here of that earnings growth is really a signal here.

A bullish signal to Wall Street