U.S. stock Q4 earnings season, is the market too conservative? Are there surprises from the Magnificent Seven?

The fourth quarter earnings report season of 2024 is approaching, and the market's focus on earnings performance is gradually increasing.

Currently, although market expectations are relatively conservative, JPMorgan analyst Mislav Matejka believes in a report on the 20th that the U.S. stock market is still expected to bring surprises, especially represented by the "Mag 7" companies such as Apple, Microsoft, Amazon, and NVIDIA.

JPMorgan expects that the earnings growth of the Mag 7 in Q4 will reach 22%, with a slowdown compared to previous quarters. However, the research report also points out that the Mag 7 has exceeded expectations for seven consecutive quarters.

It is worth noting that although the earnings growth of the Mag 7 has narrowed the gap with other companies in the S&P 500 index, its absolute earnings growth still has a significant advantage. The report indicates that excluding the Mag 7, the S&P 500 index is expected to achieve only 5% earnings growth, which shows that the Mag 7 remains the core driving force for earnings growth in the U.S. stock market.

U.S. Stocks Q4 "Conservative Yet Full of Surprises," Mag 7 Becomes the "Stabilizing Force" for Earnings Growth

According to JPMorgan's analysis, the Q4 earnings expectations for the S&P 500 index have been significantly revised down in the past few months, with the current year-on-year growth rate only at 8%, far below the 18% predicted at the beginning of last year.

However, the report believes that this conservative expectation may bring positive effects to the market. Despite the overall low earnings growth expectations, the acceleration of U.S. economic activity and the typically seasonal positive factors in Q4 may drive corporate earnings to exceed market expectations.

In addition, JPMorgan also pointed out that the U.S. economy is expected to achieve a real GDP growth of 2-3% in 2025, a growth rate far higher than Europe's 1%. This resilience in economic activity will provide strong support for earnings growth in the U.S. stock market.

The report particularly emphasizes the performance of the "Mag 7" companies. These seven companies—Apple, Microsoft, Google, Amazon, NVIDIA, Meta, and Tesla—have all achieved earnings growth that exceeded market expectations in the past six quarters, becoming an important force driving the performance of the U.S. stock market.

JPMorgan expects that the earnings growth of the Mag 7 in Q4 will reach 22%, although the growth rate has slowed compared to previous quarters, the Mag 7 has exceeded expectations for seven consecutive quarters.

It is worth noting that although the earnings growth of the Mag 7 has narrowed the gap with other companies in the S&P 500 index, its absolute earnings growth still has a significant advantageThe report indicates that excluding the Magnificent Seven, the S&P 500 index is expected to achieve only 5% earnings growth, which suggests that the Magnificent Seven remains the core driver of earnings growth in the U.S. stock market.

In stark contrast to the U.S. stock market, the earnings growth outlook for the European market appears rather bleak. JPMorgan Chase expects that Q4 earnings for the European Stoxx 600 index will decline by 1% year-on-year, and although cyclical industries are expected to achieve 5% growth, the weak performance of the energy, financial, and discretionary consumer sectors may drag down overall earnings performance