Jurrien Timmer, Global Head of Macroeconomics at Fidelity, pointed out that as of August 2nd, 305 S&P 500 companies had released their second-quarter results. EPS year-over-year growth rose to 29% from 24% before the earnings season, matching the first quarter and reaching its highest level since 2018. The 29% earnings growth rate in the chart is now at the right end of its historical distribution; the price-to-earnings ratio changed by approximately -5% during the same period, remaining within the common fluctuation range.
This indicates that the recent rise in US stocks is primarily driven by profits and profit margins.
When the bull market began in 2023, corporate earnings improvement was limited, and stock prices relied more on investors' willingness to pay higher valuations; now, with the S&P 500 operating profit margin reaching a historical high of 16.5%, fundamental support for stock prices has significantly strengthened.
