As the final quarter of 2024 approaches, investors are keenly watching U.S. companies, particularly in the tech sector, to gauge whether recent strong profit gains will continue and whether growth is expanding across different industries. This period of anticipation coincides with Wall Street’s preparations for another stellar year, driven by notable corporate performance.
In addition to earnings expectations, investors are also looking for insights from U.S. companies on the potential economic impacts of proposed tariffs, deregulation, and tax reforms under President-elect Donald Trump’s incoming administration. The earnings season for the fourth quarter of 2024 is set to begin next week, with some of the country’s largest banks, including JPMorgan Chase and Wells Fargo, slated to report on Wednesday.
Analysts predict that the overall earnings for S&P 500 companies will rise by 9.6% in the fourth quarter of 2024, slightly outperforming the 9.1% growth seen in Q3 2024, according to data from LSEG. The S&P 500 surged by 23% in 2024, marking its second consecutive year of 20%-plus gains. This performance was largely fueled by substantial gains in major tech firms, such as Nvidia and Microsoft, who are at the forefront of the AI race. The communication services sector, including firms like Alphabet, and information technology saw the most significant growth in 2024.
Despite a shaky start to 2025, the S&P 500 is trading at a relatively high valuation, with a price-to-earnings ratio of 21.5, compared to the historical 10-year average of 18, based on LSEG data. “We’ve seen substantial multiple expansion in recent years, so it’s essential to see if profits can sustain this momentum. What companies report about their core business conditions will be key,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial.
Expectations remain high for big tech firms to deliver strong earnings, although analysts anticipate that broader profit growth will start to pick up across various sectors in the near future. “We are seeing a broadening of earnings growth, which is a positive trend,” noted Stephanie Lang, chief investment officer at Homrich Berg.
In terms of sector performance, communication services and technology companies are expected to show strong earnings growth for Q4 2024, as they did throughout the year. However, the financial sector is expected to see the highest growth in Q4, with analysts predicting a 17.5% increase in profits. Looking ahead to 2025, analysts forecast broader profit growth across sectors, with healthcare, technology, and energy expected to see the most significant improvements compared to 2024.
Furthermore, investors are closely monitoring any updates regarding policy changes under President Trump’s administration, particularly those related to tariffs and deregulation. Trump’s potential tariff hikes could lead to higher consumer prices, while the loosening of regulations could boost earnings in sectors like finance.
Recent reports from CNN have suggested that Trump may declare a national economic emergency to justify imposing universal tariffs on both allies and adversaries. “The timing and execution of these tariffs will be critical in shaping market sentiment,” said Timothy Chubb, chief investment officer at Girard, a Univest Wealth Division.
Another factor that could influence market dynamics is uncertainty surrounding future interest rate cuts by the Federal Reserve. Company leaders will likely address concerns about the resilience of the consumer and the U.S. economy, which has so far defied predictions of a slowdown.
Related topics:
Global Markets on Edge as Trump’s Tariff Promises Loom
Asian Stocks Fall as U.S. Treasuries Slump and China’s Economic Woes Weigh on Sentiment
Asian Dollar Bond Issuance Set to Surge 20% in 2025 Amid U.S. Rate Cuts
