US Equity Market Broadening Beyond Mega-Cap Tech Stocks
The US equity market has reached new heights in recent months, and Goldman Sachs' Shawn Tuteja attributes this to strong second-quarter earnings. The firm's analysis shows that 64% of companies have beaten their estimates by more than one standard deviation, the highest beat rate on record. This has led to a 2% increase in consensus earnings for 2027, with the market implying around $390-$400 per share.
Tuteja notes that while the tech sector has been a significant driver of earnings growth, it's also started to show signs of skepticism among investors. Specifically, companies in the AI trade, such as memory and semiconductors, have underperformed the S&P by 130 basis points after beating estimates.
The broader market is starting to broaden out beyond just mega-cap tech stocks, with other sectors like software and healthcare showing strong fundamental stories. Tuteja attributes this to a decrease in uncertainty and an increase in discernment among investors, who are no longer just buying into the AI trade blindly.