Zhi Tong Cai Jing·2025-08-07 11:32Market Overview - The S&P 500 index is approaching historical highs, primarily driven by the technology sector, with 76.9% of its market capitalization having reported Q2 earnings, showing an overall EPS growth of 10.2%, exceeding the initial expectation of 5% [2][5] - The TECH + sector's EPS growth was particularly strong at 24.6%, while the energy sector saw a decline of 20.4%, highlighting a stark contrast in performance [2][14] Company Performance - The six major TECH + companies (Google, Meta, Microsoft, Apple, Amazon, Nvidia) reported an overall EPS growth of 27.5%, significantly outperforming the broader market's growth of 5.9% [2][5] - Specific company performances include Meta with an actual EPS growth of 38.4% against an expected 15.0%, and Amazon with a growth of 33.3% versus an expected 5.3% [3][5] Valuation Insights - Barclays notes that large-cap tech stocks are currently at the lower end of their historical premium relative to the S&P 500, indicating potential for upward valuation [4] - Despite the S&P 500 index closing the gap with European markets, large-cap U.S. stocks remain at the upper end of their 10-year valuation range, suggesting no severe deviation from historical norms [4] Core Investment Rationale - Corporate earnings resilience is supported by technology and financial sectors, with over 90% of tech stocks exceeding EPS expectations [5][7] - The expected EPS growth rate for the technology sector in 2025 is around 20%, with a rising trend in earnings revisions [5][7] - The improvement in trade uncertainty and the potential for Fed rate cuts in the latter half of 2025 provide additional support for U.S. assets [8][9] Global Capital Trends - There is a noticeable shift in global capital flows towards U.S. assets, with increased exposure expected as U.S. markets stabilize [10] - The attractiveness of U.S. dollar assets is expected to rise, particularly as trade agreements are reached with Japan and the EU [10] Earnings Disparity Concerns - The structural disparity in earnings growth among sectors is a key reason for investor hesitation, with the TECH + sector growing at 24.6% while other sectors lag significantly [11][14] - The impact of tariffs on corporate profits may have a delayed effect, with potential significant impacts expected in Q3 [21] Valuation and Psychological Factors - Concerns regarding valuations as the S&P 500 nears historical highs are prevalent, with non-tech sectors facing higher forward P/E ratios compared to historical averages [23] - The fear of "buying at the peak" is amplified, particularly as tech stocks exhibit high P/E ratios, raising concerns about potential valuation corrections [23] Conclusion on Investment Strategy - The decision to invest in U.S. stocks hinges on individual risk tolerance and strategy, with institutional views leaning towards cautious optimism due to strong tech earnings and improving trade conditions [24] - Investors are advised to focus on selecting outperforming tech stocks and financials while being mindful of potential volatility and sector-specific risks [24]