Advisors.LeutholdGroup

The S&P 500’s bottom-up operating EPS continued to improve in the second month of reporting. Since the start of Q4 announcements, the EPS figure has increased 1%. The direction of the estimate, not necessary the amount, is what’s impressive. The same can’t be said for the coming two quarters, however. Bottom-up projections for Q1-25 have fallen 4% in the last two months, while Q2-25 is off 2%. Again, sharp moves higher in the EPS snail trails are exceedingly rare. With almost all of the reporting done for 2024, the S&P 500’s operating EPS of $234 equates to a healthy YOY gain of 9.5%. The expectation for full-year 2025 currently stands at +14.3%.

Is the market on shaky ground, or does it still have room to run? In Risky, But Not Yet 'Toppy', Doug Ramsey breaks down the market’s resilience, the influence of top earners on consumer spending, and the latest signals from technical indicators. With inflation pressures persisting and valuations still high, this webinar offers key insights into where investors should focus next.

The S&P 500’s estimated bottom-up operating EPS nosed slightly higher during the first month of Q4 reporting (Chart 1). That’s a win in the usual slow-erosion, forward EPS game. The index is on track to expand operating earnings at 14% YOY for the last quarter of 2024, which would be the highest since Q2-23 (+17%) and well above the 4% average we’ve seen over the past three years. Full-year 2024 operating EPS is starting to crystalize around $233—a 9% improvement from 2023’s results. At present, EPS growth projections for 2025 are just shy of 16%.

It depends on who you ask. Non-equity investors might think the Trump trades are playing out just like in 2016. Over the last few months, FX traders and bond investors could have followed the 2016 script and made out like bandits (Charts 1 & 2). However, at this juncture, it might be time to at least take some chips off the table—if the 2016 analog stays intact, both the U.S. dollar and interest rates are poised to change course over the next few months. Near-term knee-jerk reactions aside (stronger dollar, lower yields), the newly announced tariffs will likely impact growth more than anything else, which would make it hard to sustain a stronger dollar and higher rates. 

New Years Eve 2024 was a party to remember for the 4% Club (stocks with a minimum 4% weight in the S&P 500). Thanks to December’s ridiculously top-heavy performance, a record five firms toasted the new year in the VIP-only Club (Chart 1). For most of the past five years, membership had been limited to two or three companies. Before that, the Club’s March 2000 high-water mark of three firms seemed unobtainable—and, with a little hindsight, a laughable signpost of the Tech Bubble. Well, who’s laughing now?