Investing.com — A handful of artificial intelligence companies drove stock gains in the first six months of the year, but the S&P 500’s potential upside is likely to grow in the second half of 2024, according to Wells Fargo analysts.
Shares are up 14.5% year-to-date in the first half of the year, the third-best six-month performance in the past 25 years.
But only a few stocks made up that surge, according to FactSet data cited by Wells Fargo: A subsector of four of the so-called “Magnificent Seven” companies — Apple (NASDAQ:), Amazon (NASDAQ:), Microsoft (NASDAQ:), Nvidia (NASDAQ:), Tesla (NASDAQ:), Alphabet (NASDAQ:) and Meta Platforms (NASDAQ:) — accounted for just over 52% of the S&P’s return, while the remaining 499 companies in the 503-company index rose less than 48%.
Wells Fargo analysts said in a client note that consensus revenue estimates indicate growth will widen “notably” from the fourth quarter of this year and “gain momentum” through the middle of next year.
“This expansion in earnings growth is in line with our outlook and should support share count growth over the next 18 months,” Wells Fargo analysts said. “We believe SPX overall earnings growth is likely to remain relatively solid over the next few quarters, with the U.S. and global economies set to recover and perform well in the second half of 2025.”
Still, they warned that stock markets face a “challenging landscape” in the near term as the slowing economy and rising interest rates continue to “take their toll.”
“For now, we suggest holding back gains in strong sectors and looking for opportunities in the energy, industrials, materials and healthcare sectors,” the analysts said.
