The war bump is a false victory for S&P 500 profits

The S&P 500 has seen strong earnings growth, but this is largely due to a few sectors benefiting from the current global situation, such as energy, defence, and materials. These sectors have seen an increase in demand due to the Iran war and the subsequent rise in fuel prices. This narrow concentration of growth makes the market vulnerable if investment returns in these sectors disappoint, potentially leading to a decline in overall S&P 500 profits.

Why it matters

The strong earnings growth of S&P 500 companies is largely due to a few AI-linked companies and sectors that have benefited from the Iran war. This may not be a sustainable trend and could lead to a correction in the market.

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