S&P 500 Flattens as Forward P/E Falls to 20.7 Despite 24% Q2 Earnings Growth
Updated
Updated · CNBC · Jul 14
S&P 500 Flattens as Forward P/E Falls to 20.7 Despite 24% Q2 Earnings Growth
2 articles · Updated · CNBC · Jul 14
Summary
The S&P 500 has gone sideways for two months even as earnings forecasts climbed, pulling its 12-month forward P/E down to 20.7 from near 22 ahead of second-quarter results.
A projected 24% year-on-year profit jump is driving the disconnect, but investors appear reluctant to extend valuations with margins and profit share already near record highs in a mature expansion.
AI spending is reshaping index math: four hyperscalers—16% of the S&P 500—are pouring free cash flow into capacity, while semiconductor firms, about 18% of the index, capture the revenue but trade on lower cyclical multiples.
That mix has cooled tech leadership, with semiconductor stocks down 15% in three weeks, while the median S&P 500 company is seen posting 8% EPS growth and is already up 8% this year.
Strategists remain split: Bank of America sees earnings momentum intact, but others warn that when prices and EPS both run far above trend, market reactions to results can disappoint even if the numbers beat.