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Earnings Growth Momentum Positive for Equities


Equity investors have enjoyed a strong first half of the year, with the S&P 500 up nearly 16%. This has largely been due to enthusiasm surrounding artificial intelligence and better-than-expected earnings growth.


So, how might the stock market perform in the second half? History suggests there could be more upside for investors. Since 1945, when the S&P 500 has returned greater than 10% in the first half of the year, the average return for the index in the second half has been 8.1%.


On top of the historical evidence supporting the potential for a strong second half, earnings expectations continue to improve. The 12-month forward earnings estimate for the S&P 500 is $261, which is 7% higher year to date. More importantly, estimates have increased 4% from three months ago, the biggest jump in two years.


Although more volatility could be ahead as the economy potentially slows and political headlines emerge, we expect corporate earnings to remain resilient throughout the year. This should provide a positive backdrop to support the overall equity market. 

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