As we dive into the heart of the Q3 2024 earnings season, one big question stands out: Where are the profits coming from? As our Chart of the Week above shows, the answer is a familiar story of the Haves and the Have Nots—a stark divide between a few big winners and the rest of the market.
The so-called Magnificent 7 companies—a group of the largest and most recognizable companies in the U.S. stock market—are expected to report an impressive +18.1% year-over-year (YoY) earnings growth this quarter. Meanwhile, the remaining 493 companies in the S&P 500 (the ‘ex-Mag 7’) are barely scraping by, with just +0.1% growth.
While this lopsidedness may raise concerns, there’s good news ahead. Earnings leadership from these top players is expected to balance out in the coming quarters. A broader range of companies is expected to step in and take the earnings baton from the big boys. Theoretically, this should help support the market’s expanding breadth that started this past summer.
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The S&P 500 Index, or Standard & Poor’s 500 Index, is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S.