Strong Real GDP Growth and Tech Stocks Drive U.S. Stock Market Performance

  • Disinflation may not be a headwind for corporate earnings, according to BofA Global Research strategists.
  • Real GDP growth has the highest correlation with S&P 500’s quarterly earnings growth compared to other macro variables like CPI and PPI.
  • Inflation is a lagging indicator for corporate earnings.
  • Earnings growth expected to slow for the Magnificent Seven group of tech stocks for the second straight quarter.

BofA Global Research strategists argue that disinflation may not negatively impact corporate earnings as previously thought. They found that real GDP growth has the highest correlation with S&P 500’s quarterly earnings growth compared to other macro variables like CPI and PPI, and inflation is a lagging indicator for earnings. The Magnificent Seven group of tech stocks may see slower earnings growth for the second consecutive quarter.

Factuality Level: 8
Factuality Justification: The article presents a balanced view of the relationship between inflation, disinflation, and corporate earnings based on research conducted by BofA Global Research strategists. It provides relevant information about the correlation between various macroeconomic variables and their impact on company earnings. The article also discusses the performance of the S&P 500 and the potential market setup for U.S. stocks. While it does not delve into excessive details or personal opinions, it could benefit from more context on the ‘Magnificent Seven’ group of tech stocks.
Noise Level: 2
Noise Justification: The article provides a brief analysis of the relationship between inflation, disinflation, and corporate earnings, but it lacks in-depth discussion or evidence to support its claims. It also includes some irrelevant information about U.S. stocks trading at fresh records and historical data without providing any significant insights or actionable knowledge.
Public Companies: Walmart (WMT), Costco (COST), GameStop (GME), Nvidia (NVDA)
Key People: Ohsung Kwon (Equity and Quant Strategist at BofA Global Research), Savita Subramanian (Equity and Quant Strategist at BofA Global Research), J.D. Vance (Running Mate of Donald Trump), Cohen (CEO of GameStop)

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Financial Relevance: Yes
Financial Markets Impacted: U.S. stock market, S&P 500 earnings, Big Tech companies
Financial Rating Justification: The article discusses the impact of disinflation on corporate earnings and its correlation with financial markets and specific companies like the S&P 500 and Big Tech stocks.
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Extreme Rating Justification: There is no mention of an extreme event in the article. The content discusses economic and financial topics related to inflation, earnings growth, and stock market performance.

Reported publicly: www.marketwatch.com