Hello, this is James Mayer, Branch Manager, from the Huffman Mayer Wealth Management Group of Wells Fargo Advisors. July seemed like a month filled with ups and downs, especially in the world of politics. We hope everyone is doing their best to stay stress free. We appreciate you tuning in for our latest edition of “The Market Recap!” Let’s see what Phil Anderson, Associate Vice President - Investments has to say about July.
Thanks James.
1. According to FactSet, for 2Q24, revenues for the S&P 500 are expected to have grown by 4.8% y/y, just below the 10-year average of 5.1%. Earnings for 2Q24 are expected to have grown by 9.3%, versus a 10-year average of 8.4%. Through July 12th, only 5% of the S&P 500 have resulted 2Q24 results, with the bulk of companies reporting between now and the end of August.
2. According to data from JPMorgan, the ten largest constituents of the S&P 500 trade for a price to earnings (P/E) ratio of 30.3x at the end of 2Q24, versus a P/E ratio of 17.6x for the remaining 493 stocks. The average P/E ratio for the index as a whole over the last 28 years has been 16.6x earnings.
3. According to the Federal Reserve Bank of St. Louis, U.S. Household banked a large amount of stimulus payments in 2020-2021 and have since been spending those balances down. Currently, U.S. “excess” savings by households stands at $600 billion, versus a peak of $2.3 trillion (a 74% decline in around 2 years). Currently, the average U.S. household saves around 4% of its disposable income and spends 9.7% making payments on borrowed money (aka “debt service”). Debt service averaged ~11% in the 1990s and peaked at 13.3% in 2007.
In Summary:
1. 2Q24 Revenues and earning per share (EPS) are expected to grow by 4.8% and 9.3%, respectively. If realized, those growth rates would be slightly worse on the revenue line and slightly better on the EPS line than their 10-year averages.
2. The top 10 stocks in the S&P 500 trade for 30.3x EPS, versus 17.6x for the rest of the index and a long-term average of 16.6x.
3. U.S. consumers have spent down 74% of their saving from COVID-19, and while savings rates are lower than average now, debt service figures look healthy relative to history.
Let’s see what James Mayer, Branch Manager and Ryan Richards, Associate Vice President – Investment Officer have for us.
JAMES: Thanks Phil! As many of you know we are approaching our annual client appreciation event held at Brant’s Apple Orchard.
RYAN: That’s right James. Also Known in the office as Nora’s big birthday celebration!
JAMES: That’s right, but it is most importantly to show how much we appreciate our clients and their families. You should have received an invite in the mail recently and if you haven’t already RSVP’d, please call our office.
RYAN: Yes, the event will be on August 10th from 1pm-5pm. So please come and join us.
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As always stay happy, safe, and healthy and hopefully we will see you very soon.