Solid bull market supported by the resumption of the profit cycle and expectations of rate cuts by benchmark central banks. Maintaining the objectives of 5,600 in 2024 and 6,300 in 2025 for the S&P 500.
Factset revised upwards its estimate of S&P 500 profit growth from 3.4% at the end of March to 5% today and Lipper Alpha to 7.2%. The increase is higher than expected with a positive surprise rate of 77% compared to the 10-year average of 74%. For several quarters, prices have been “disturbed” by a strongly positive contribution from Big Techs and by a strongly negative contribution from the Energy and Pharma sectors. In 1Q24, S&P 500 profits increased by 7.2% overall, but they fell by 1.2% without the Technology and Communication sectors and they exploded by 17.2% without the Energy and Pharma sectors. As some like to demonstrate, it is partial to show that without the Magnificent 7, profits would decline. Not wrong, but partial (an approach bear). From 2Q24, everything will return to normal. The negative contribution of Energy and Pharma will disappear. The situation will be more homogeneous and the overall progression of profits of the S&P 500 will accelerate, more in harmony, estimated at more than 10% in 2024 and 2025. The Russell 2000 and the Stoxx 600 will show positive profit growth rates from 2T24. So the rise in indices will come from the resumption of the profit cycle and less from the rise in multiples.
Last week, we observed a switch from Novo Nordisk and Eli Lilly to Amgen. Amgen has obtained encouraging interim results on its drug, Maritide, against obesity. Full results are not expected until 2025. The advantage of Amgen’s drug would be monthly dosing versus weekly dosing for Novo Nordisk (Wegovy) and Eli Lilly (Zepbound). The correction of Novo Nordisk and Eli Lilly are buying opportunities with respective valuations of DKK 1,035 and $1,000.
For those who follow bitcoin, last week’s break of support at $60,000 pushed technical analysts to point to the next support between $50,000-52,000. But a price below $60,000 only lasted two sessions, with bitcoin now worth nearly $64,000. For analysts, the halving should lead bitcoin to higher levels, but still with high volatility.
After the April consolidation, many companies offer buying opportunities like Meta, defense sector, UBS, Netflix, Intel, …
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