(Jan 26): Some of Wall Street’s top strategists see tentative signs that US earnings are expanding beyond the mega-cap technology stocks at the heart of the artificial intelligence boom.
While the reporting season is still in its early stages, an analysis by JPMorgan Chase & Co shows that forward guidance has topped expectations at roughly half of the S&P 500 companies that have provided an outlook for 2026.
“Since most of the companies that have reported are outside the tech sector, this trend suggests a broadening of growth across other industries this year,” strategist Dubravko Lakos-Bujas wrote in a note.
Goldman Sachs Group Inc also expects earnings to support an expansion. A team of strategists led by Ben Snider forecasts strong economic growth in the first half of 2026, which “creates larger near-term tailwinds for smaller and more cyclical stocks than for the largest stocks in the market”.
Other metrics offer further support for a broadening after three years of domination by heavyweight tech stocks.
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The market-cap weighted S&P 500 Index has risen about 1% compared with a nearly 4% gain in an equal-weighted gauge that dilutes the impact of Big Tech. And the share of stocks trading above their 200-day moving average is near the highest levels of the past year, according to data compiled by Bloomberg.
With analysts expecting the gap in earnings growth between the Magnificent Seven group of tech stocks and the rest of the S&P 500 to narrow, investors are focusing old-economy sectors such as banks, consumer goods firms and miners.
Procter & Gamble Co is one example. Its shares rose 2.7% last Thursday after executives signalled US sales are rebounding and expressed confidence the company will meet its full-year guidance. United Airlines Holdings Inc also advanced after the carrier forecast a strong year on the back of higher demand.
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The earnings season kicks into high gear this week with companies accounting for a third of the S&P 500’s market capitalisation expected to post results, including Microsoft Corp and Boeing Co.
Goldman’s Snider cautioned the bar is high for the momentum to continue over the longer term. He said current estimates suggest S&P 500 earnings will rise 15% in 2026, outpacing a 10% increase for its equal-weighted counterpart.
The strategist also expects slower economic growth in the second half of 2026 and 2027, which “should limit the runway for the widespread broadening rotation”.
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