JPMorgan Casts Doubt on "Magnificent 7" Earnings Convergence

JPMorgan Casts Doubt on "Magnificent 7" Earnings Convergence

JPMorgan strategists are throwing shade on the widely held belief that the earnings gap between the "Magnificent 7" and the rest of the S&P 500 will narrow anytime soon.

The "Magnificent 7" Questioned

• Tech Dominance: The "Magnificent 7" refers to a group of large-cap technology companies that have been the primary drivers of S&P 500 earnings growth in recent quarters.
• Earnings Gap Persistence: JPMorgan argues that the expectation of this gap shrinking may be overly optimistic. They point out that the "Mag 7" has consistently exceeded earnings expectations compared to the broader market over the past five reporting seasons.

Continued Tech Strength Expected (for Now)

• Growth Slowdown, But Still Strong: While the "Mag 7" is projected to see a deceleration in earnings growth year-over-year, it's still expected to be significant at around 29%.
• Broad Market Catch-Up?: The rest of the S&P 500 is finally expected to see positive earnings growth for the first time in five quarters, but at a much lower rate of just 5%.

Looking Ahead: Will the Trend Hold?

• Focus on Upcoming Earnings Reports: All eyes will be on the upcoming earnings reports from both the "Mag 7" and the broader market to see if JPMorgan's skepticism holds true.
• Tech Innovation a Key Driver: Continued innovation and strong demand could allow the "Mag 7" to maintain their earnings lead, while the overall market performance hinges on various factors.

Investor Takeaway

• Don't Rely on Predictions Blindly: JPMorgan's analysis suggests being cautious about overly optimistic forecasts.
• Research Individual Companies: Conduct your own research on both the "Mag 7" and other companies before making investment decisions.
• Consider Diversification: Spread your investments across different sectors to manage risk.

Thinking about investing in the technology sector? The FMP ETF Holdings API can be a valuable tool to research ETFs that might hold some of the "Magnificent 7" or other tech companies. This API allows you to search for ETFs by sector or keyword and see their holdings, giving you a deeper understanding of the companies within the ETF and their weightings.

Ready to Dive Deeper into ETF Research? Check out the FMP ETF Holdings API documentation to learn more: FMP ETF Holdings API

Remember, this information is for educational purposes only and should not be considered financial advice. Always conduct your own due diligence before making any investment decisions.