Investing.com — The scope of a potential rally in the S&P 500 will widen in the second half of 2024 after gains in the first six months of the year were driven by just a handful of AI-linked companies. to Wells Fargo analysts.
Figures are up 14.5% in the first half of the year to date, the third-best performance over a six-month period in the past 25 years.
Yet only a small number of names were part of the rise, with a four-stock subsector of the so-called “Magnificent 7” companies: Apple (NASDAQ:), Amazon (NASDAQ:), Microsoft (NASDAQ:), Nvidia (NASDAQ :), Tesla (NASDAQ:), Alphabet (NASDAQ:) and Meta Platforms (NASDAQ:) – responsible for just over 52% of the S&P’s returns, according to FactSet data cited by Wells Fargo. Meanwhile, the remaining 499 of the 503-company index accounted for less than 48% of the gains.
In a note to clients, Wells Fargo analysts said consensus earnings estimates show growth will become “noticeably” more widespread starting in the fourth quarter of this year and will “gain momentum” by the middle of next year.
“This broader earnings growth is consistent with our outlook and should support a growing number of stocks over the next 18 months,” Wells Fargo analysts said. “We think SPX’s overall earnings growth is likely to remain relatively strong in the coming quarters, and we see the U.S. and global economies recovering and outperforming in the second half of 2025.”
Still, they warned that stocks face a “bumpy road” in the near term due to a slowing economy and higher interest rates that “continue to take their toll.”
“For now, we suggest limiting gains in the better-performing sectors and looking for opportunities in the energy, industrials, materials and healthcare sectors,” the analysts said.
