16 July 2024 – US reporting season: broad-based earnings growth. Over the last three reporting seasons, companies in the S&P 500 have increased their profits by an impressive eight percent year-on-year. And the third plenum of the Chinese Central Committee is focusing on strengthening the domestic economy.
Positive development in the US reporting season: broad-based earnings growth
In the last three reporting seasons, companies in the S&P 500 have increased their profits by an impressive eight percent year-on-year. What is particularly remarkable is that analysts expect the majority of companies outside the Magnificent 7 to have increased their profits by an average of six percent in the current second quarter reporting season. This indicates solid and broad-based earnings growth.
Remarkable performance of the Magnificent 7
The seven largest companies, the “Magnificent 7”, have achieved a remarkable performance of 54% over the past twelve months, underlining their outstanding position in the market. Since the global financial crisis, companies have beaten analysts’ expectations more than 90 percent of the time, and earnings are expected to slightly exceed forecasts this reporting season as well.
This positive outlook could help the broad market segment continue to generate solid gains and support the strong performance of the Magnificent 7.
Chinese domestic economy in focus at third plenum
The third plenum of the CPC Central Committee is taking place this week, with a focus on economic modernization. The focus is on key topics such as science and technology, including renewable energy, new materials, artificial intelligence and high-end components. These initiatives are intended to strengthen China’s technological expertise and ensure future economic progress.
Improving logistics and creating fair market access
The focus will be on improving logistics, creating fair market access and promoting the private sector in order to attract foreign investors. Reforms in the hukou and tax system are aimed at a fairer distribution of social security benefits and income.
Main focus on promoting domestic demand
One focus is on promoting domestic demand through new consumption scenarios and urbanization projects, supported by the People’s Bank of China, without strongly devaluing the renminbi. The real economy will be strengthened by adjusting interest rates, reserve requirement ratios and long-term government bonds.
Measures to improve the business environment for private enterprises and attract foreign investment are planned, including trade in intermediate products, service trade and digital trade. The modernization of the industrial base through new technologies and the planning of future industries should increase China’s global competitiveness.
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