Aneeka Gupta (WisdomTree) | The current earnings season sheds plenty of light on the outlook for global equity markets. This time last year, the world was thrown into disarray owing to the COVID-19 pandemic. Since then, we have seen lockdowns lifted as vaccination rollouts gather pace. In addition, the gradual resumption of economic activity, stimulative global fiscal plans, and the release of pent-up consumer demand are being reflected in first-quarter earnings results. As a result, the breadth of earnings revisions has been strongest in the US, followed by Japan, Europe while Emerging Markets and China are turning more neutral.
Patrik Lang, CFA Head of Equity Strategy Research, Julius Baer | For Q2 consensus expects S&P 500 earnings to decline 43.9%, which would be the largest y/y earnings decline since Q4 2008 (-69%). For Q3 consensus expects earnings to decline by -25.4% and for Q4 by -12.8% followed by 28% earnings growth in FY 2021. Based on our macro models and historical post-recession earnings patterns, we see upside risk to consensus expectations for both H2 2020 and FY 2021.
Christian Gattiker (Julius Baer) | With all the macroeconomic numbers, political news flow and earnings season reporting that has been going on, investors have had their hands full finding time to assess the situation. At the same time, there has been a quite substantial price reaction. So, the easing of the news intensity has brought a pause to investor activity.
Yves Bonzon (Julius Baer) | It is my long-held view that political noise is an exogenous factor that is hard to time. As long as we can remain sufficiently confident that the external shock is not triggering a systemic crisis or a recession, we must stay focused on the fundamentals and resist the temptations of exploiting the irrationality of a whipsawing market. And I still see a wealth of factors favouring a long-term uptrend of equities in a low-growth and low-inflation world.
MADRID | The Corner | We’re in the middle of second-quarter earnings season and companies are showing their cards to investors. Note the difference on both sides of the Atlantic: in the US, 53% of S&P500 firms have posted their results and 78% have performed better than expected (average surprise of 6%, JP Morgan analysts pointed out). EPS growth is of 11% yoy, while sales went up by 5% with 67% of companies having better than expected numbers. Meanwhile in Europe, with 152 SXXP companies having posted their results, 56% have turned in an average +0.4% EPS. Year-on-year EPS has risen by 18% (8% if we exclude financial entities), although yoy sales decreased by -2%.
WASHINGTON | By Pablo Pardo | We are, again, in the midst of an earnings season. But, should we call it ‘earning season’ or ‘earnings exceed the forecast session’? Because companies tend to earn more than they expected, and also more than the markets’ forecast. Another nail in the coffin of the Efficient Market Hypothesis?
All obvious events are treacherous animals: take for instance the understandable fact that publicly traded companies do their best for each earnings season to appear and sound as joyous as investors would have dreamt. The new accounting system of 2007, primarily based on international standards issued by the International Accounting Standards Board (IASB), raises target information to the category of the golden calf of the accounting rules. Among these parameters, professors Leandro…