The Q2 earnings growth rate of US stocks far exceeded expectations, and Wall Street raised the S&P 500 year-end average target to 7894 points

Comparative news, according to Bloomberg, the second-quarter earnings of the S&P 500 index constituent stocks increased 31% year-on-year, higher than the previous 23% forecast, making it the strongest increase since Bloomberg Industry Research had data in 1992, excluding the recovery phase after a major recession. More than 90% of the S&P 500 constituents have announced financial reports, and the overall profit performance for the first half of the year is expected to be the best in the same period since 2021.

Analysts believe that on the one hand, profits exceeded expectations due to the resilience of the US economy, and on the other hand, from the increase in profit margins brought about by AI. The net profit margin of the S&P 500 constituent stocks has risen to close to 16% from 14%, where it was previously difficult to break through. Nationwide's chief market strategist Mark Hackett said that AI has mainly been a cost center in the past few years, but this year it has reached an inflection point and has begun to transform into a profit center.

As earnings grew faster than the index, the price-earnings ratio of the S&P 500 for the next 12 months fell from about 26 times at the beginning of the year to just under 22 times. Wall Street strategists also continued to raise their expectations. Currently, the S&P 500 target point average has risen to 7894 points at the end of the year, and there is still room for about 1% increase from the historical high set this week; the profit growth forecast for the whole year was raised from 15% to 27% at the beginning of the year.

This round of profit growth is no longer limited to big tech companies. As of August 12, about three-quarters of the 1,500 US listed companies that have disclosed results have simultaneously exceeded expectations in terms of earnings per share and revenue. Healthcare was the only sector in the S&P 500 where profits contracted in the second quarter.