S&P 500 Relies on Tech for Growth in Q4 2024, Says Barclays

The S&P 500's growth for Q4 2024 heavily depends on technology stocks, according to Barclays strategists. Historically, January’s performance often sets the tone for large-cap US equities. Barclays analysis shows that a January decline typically results in a median annual return of +2.5%, while gains exceeding 1.5% in January are linked to a median return of +11.4% for the year.

Barclays strategists, led by Venu Krishna, noted that downward revisions in sectors excluding technology are 300 basis points higher than average. This indicates bearish sentiment for non-tech sectors as the earnings season begins. Consensus estimates predict that most non-tech sectors will report Q4 earnings below their long-term medians, setting low expectations for upcoming results.

Although year-over-year earnings per share (EPS) growth for the S&P 500 excluding Big Tech is expected to rebound in Q1 2025, Q4 2024 projections fell short due to negative operating leverage and related revisions. Barclays’ consensus EPS forecast for fiscal year 2025 dropped by $1, now at $274 compared to their $271 estimate.

Despite some deceleration expected in the first half of 2025, Barclays anticipates Big Tech to deliver EPS growth well above long-term medians. The strategists also highlight that the S&P 500’s margin improvement for Q4 2024 is likely to rely on the continued strength of technology giants.

As the earnings season progresses, technology's influence on the S&P 500 underscores its critical role in driving market performance, with Big Tech remaining a key focus for investors seeking growth.