We view the Materials sector as a canary in the coal mine and will continue to monitor performance, as a rising tide for this sector tends to lift most ships as they are a leading economic indicator.
Technology continues to dominate headlines and for good reason: the sector is experiencing somewhat of a renaissance. Developments in AI are hitting the market at an unprecedented cadence, with those companies most able to benefit from the AI revolution in the near term seeing actual and expected earnings rise along with stock multiples.
Despite near-term softness across some portions of the sector, most tech annual top- and bottom-line guides are setting the stage for growth in 2024, as nets have been cast on the comet known as AI, which blazes faster and brighter.
Similar to commentary we observed in our Big U.S. Banks Sector Beat, management teams continue to see consumer spending normalizing, but overall better than feared as some investors and corporate executives had been bracing for recession risk in early 2024.
The better-than-expected U.S. GDP, consumer confidence, and spending in various areas certainly point to a more buoyant U.S. consumer, but on the flipside is the burden of record credit card debt and borrowings – the current concern about which can best to described as a bombastic shoulder shrug.
In our early analysis of industrial earnings thus far, “stability” was the common tone evoked on calls — a welcomed message from one of the economy’s largest constituencies, and a far cry from recession projections heard throughout much of last year.
So far, Q4 prints are holding up generally well and it’s promising to hear industrial executives express cautious optimism about market stability and growth prospects.
With a wall of worry resurrected earlier in 2023 for the sector, U.S. Bank year-end earnings performances seemed more muted in comparison.
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