The overall outlook for S&P 500 companies, however, shows a projected 7.1% drop in second-quarter earnings, which would mark the third consecutive quarter of decline. consumer and generally upbeat economic data have been supportive of risk assets, despite a tightening Fed.Īs we enter the second half of the year and with the current Q2 earnings season in the spotlight, some major banks have already reported strong results. Encouragingly, there are initial signs of mid and small-cap stocks starting to participate in the rally, as indicated by the outperformance of the Russell 2000 Index since the beginning of June. 2 There are concerns about this weak market breadth, which has been limited so far. 1 The positive market sentiment was supported by generative AI, robotics, and themes related to the reshoring narrative, which significantly eclipsed risks such as recession fears, elevated levels of inflation, the prospect of more Fed hikes, geopolitical risks, the debt ceiling, and the collapse of certain regional banks in the U.S. Similarly, the S&P 500 index rose 16% in the first half-although the median stock only advanced 5%, as market breadth has been relatively narrow and driven predominantly by mega cap tech names. In the first half of 2023, the Nasdaq 100 rallied 39%, its strongest first half year rally since 1983 when it rose 37%.
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