Sam Stovall on S&P 500 Outlook, Tech Growth, and Sector Performance

S&P 500 Earnings and Projections

• 📈 Tech sector is projected to post strong results, with an estimated 18% earnings growth by 2026, outpacing the S&P 500's projected 13% for the same period.
• 🎯 Initial expectations for year-on-year earnings growth were low (around 2%), making it likely that actual results would exceed estimates, as has happened in 63 of the last 65 quarters.
• 📊 Management has effectively managed expectations, turning initial low projections into significantly higher actuals, with only two sectors now expected to decline.

Sector Performance and Valuations

• 🔍 While the overall S&P 500 valuation is considered rich at 21-22 times earnings, certain sectors and sub-industries show attractive valuations combined with positive momentum.
• 💡 Recommended groups include diversified banks, electrical components, gold, investment banking, and system software, identified through a combination of fundamental analysis and technical indicators.

Technical Analysis and Market Trends

• 📊 Technical analysis, using a combination of daily and weekly charts, helps gauge near-term outlook and intermediate-term trends.
• 📉 On April 8th, when the S&P hit a low, only 1% of 155 sub-industries were trading above their 50 and 200-day moving averages, suggesting investors were overly pessimistic.
• ⚠️ Technical indicators like the Zweig Thrust, following a significant down day, can signal that a market bottom may be forming.
• 🛠️ The principle of "the trend is your friend" is applied, looking for reasons to stay with an established trend or to recognize when a trend change is imminent.