High sentiment continues to be embedded into S&P 500 valuations, implying future price gains will need to be backed by earnings upgrades. Therefore, we continue to recommend sticking to segments backed by earnings momentum instead of just price momentum and multiple expansion.. This has reversed the consistent downgrade trajectory these sectors have had over much of the past year.
Interactive media services: Similarly, strong earnings upgrades over the past three months and a solid growth outlook culminate in our overweight stance.: Despite a recent correction, automobile manufacturers’ forward EV/EBITDA remains at an 84th percentile, and a roughly eight per cent downgrade on 2025 earnings expectations fails to provide confidence, prompting our underweight stance.
Communication equipment: At odds with the rest of the technology stocks, this industry has been getting sharp downgrades .