Q2 2024 Investment Outlook: Earnings growth not just about tech

Solid U.S. economic and corporate earnings growth have supported risk appetite, driving stocks to all-time highs – even as bond yields have jumped. We think earnings will need to deliver on high expectations, especially after last week’s data showing sticky inflation spooked investors. As Q1 results start, we look for brighter earnings in sectors beyond tech, like industrials and materials, as the economy holds up. We stay overweight U.S. stocks while monitoring Middle East tensions.

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Market backdrop

U.S. crude oil prices hit six-month highs, partly on heightened tensions in the Middle East. We are watching developments closely after Iran’s strikes in Israel over the weekend and see heightened geopolitical risks adding to economic volatility. U.S. stocks fell nearly 2% last week and 10-year Treasury yields pulled back after hitting 2024 highs near 4.60% after the March CPI report. The reported showed services inflation may put upward pressure on overall inflation sooner than we thought. 

Source: mPast performance is not a reliable indicator of current or future results. Indexes are unmanaged and do not account for fees. It is not possible to invest directly in an index. Sources: BlackRock Investment Institute, with data from LSEG Datastream as of April 11, 2024. Notes: The two ends of the bars show the lowest and highest returns at any point year to date, and the dots represent current year-to-date returns. Emerging market (EM), high yield and global corporate investment grade (IG) returns are denominated in U.S. dollars, and the rest in local currencies. Indexes or prices used are: spot Brent crude, ICE U.S. Dollar Index (DXY), spot gold, MSCI Emerging Markets Index, MSCI Europe Index, LSEG Datastream 10-year benchmark government bond index (U.S., Germany and Italy), Bank of America Merrill Lynch Global High Yield Index, J.P. Morgan EMBI Index, Bank of America Merrill Lynch Global Broad Corporate Index and MSCI USA Index.

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