Banks expected to report 10% drop in profits, large tech companies outperforming

From Morningstar: 2024-07-09 05:27:00

Dan Kemp, Morningstar’s global chief research and investment officer, provides insights into key market performance and economic trends. Last week, economic data took a backseat to politics. The June jobs report met expectations, but downward revisions to May and April data hinted at a slightly weaker economy, increasing expectations of an earlier interest rate cut.

US Large-Cap Stocks outperformed globally, with the Morningstar US Large Cap Index rising 2.55% while the US Small-Mid Cap Index fell 0.53%, widening valuation disparities. Large tech companies like Apple, Microsoft, Meta Platforms, and Alphabet led the way, underscoring the challenge of finding value in a sentiment-driven market.

Earnings season starts this week with banks expected to report a 10% drop in profits compared to last year. Despite predictions, the Morningstar US Banks Index has performed well, largely due to high concentration, notably with JPMorgan Chase accounting for 34%. While JPMorgan may be overpriced, analysts see value in 50% of covered banking companies.

All eyes are on the June CPI report this week, with inflation data and speeches by Federal Reserve officials expected to influence market dynamics. Following weaker job numbers, the importance of focusing on quality and value in investments is emphasized, as short-term economic shifts may not strongly correlate with long-term returns.



Read more at Morningstar: Markets Brief: Banks Kick Off Q2 Earnings Season