In the first quarter of 2024, the S&P 500 saw an impressive 11% return, hitting a new all-time high and marking its best first-quarter performance since 2019.
Although the rally continued to be led by Big Tech giants like Nvidia (NASDAQ:NVDA), Microsoft (NASDAQ:MSFT), and Meta Platforms (NASDAQ:META), among others, the market breadth also improved notably.
This improvement is evidenced by the 7% rise in the equal-weight version of the S&P 500, indicating a broader rally beyond just the largest stocks, Goldman Sachs strategists said in a note.
“Components of the YTD return included +295 bp from better earnings expectations, +721 bp from a 7% expansion in the forward P/E multiple to 21x, and +40 bp from dividends,” analysts highlighted.
“The index was led by Comm. Services (+16%) while Real Estate (-1%) fared the worst. Underneath the surface Cyclicals outperformed Defensives by 5 pp in 1Q as the market continued to price an optimistic growth outlook amid firm economic data,” it added.
Goldman Sachs strategists now expect that in 2024, earnings per share (EPS) for the S&P 500 will increase by 8%. However, they predict the index itself will stay unchanged at 5200, citing a slight contraction in the price-to-earnings (P/E) multiple from its current level.