The latest projections from Bank of America analysts suggest that the dominance of the Magnificent 7 in driving S&P 500 earnings growth may be coming to an end. While these seven companies, including Microsoft, Amazon, Meta, Apple, Alphabet, Nvidia, and Tesla, have been leading the way in recent quarters, their growth is expected to slow in the second quarter of 2024.
On the other hand, the remaining 493 companies in the S&P 500 are anticipated to post their first quarter of year-over-year earnings growth since the fourth quarter of 2022. This shift in growth dynamics could mark the beginning of a trend where earnings growth broadens across the market.
Bank of America analysts predict a 10% year-over-year growth in earnings for the S&P 500 as a whole, with a 6% growth rate for the index excluding the Magnificent 7. This positive change would be the first since the end of 2022. The analysts also expect a typical 2% beat for S&P 500 earnings per share in the second quarter, which would align with historical averages but be the smallest quarterly beat since late 2022.
As for the Magnificent 7, their slowing growth is expected to be offset by the other 493 companies in the S&P 500. However, concerns have been raised about the high expectations surrounding these companies, particularly in the realm of artificial intelligence. While the Magnificent 7 have outpaced the S&P 500 since the beginning of 2024, Tesla is the only member that has not seen significant gains.
Overall, DailyBubble sees the potential shift in earnings growth dynamics as a positive development for the market, as it indicates a more balanced distribution of growth across a wider range of companies. Investors should keep a close eye on how these trends unfold in the coming quarters.