Caroline Valetkevitch (Caroline Valetkevitch)
NEW YORK (Reuters)-Investors will be eager to see whether the upcoming quarterly reports and prospects of US companies confirm expectations for a strong rebound in earnings and the economy in 2021, which were undermined by the coronavirus pandemic last year.
The US stock market is at a historical high, mainly due to the optimism that the launch of the vaccine against the COVID-19 virus will bring about a recovery, and the hope of more fiscal stimulus measures according to the US President-elect Biden also supported the market’s boost.
JPMorgan Chase, Citigroup and other big banks have released performance reports, starting this week to release earnings reports for the last quarter of 2020.
According to Refinitiv̵
However, this year’s earnings are expected to rebound and are expected to grow by 16.4% in the first quarter. Since the fall, the forecast has improved, and benefiting from an easy comparison with 2020, S&P 500 earnings are expected to grow by 23.6% in 2021.
Investors may want to know more about the company’s executives’ views on 2021 than the results of the fourth quarter, which comes at a time when there is a surge in virus cases across the United States and Europe.
Kenneth Leon, head of research at CFRA Research, said: “Management and analysts will not actually necessarily focus on the rearview mirror. They are indeed thinking about 2021.
Leon said, “The pulsation of each department and considering whether there is attractive value there or whether they need to take a breath, how this will affect investors will also be the key.”
According to data from Refinitiv, the price-earnings ratio of the S&P 500 Index is 22.7 times, which is much higher than the long-term average of about 15 times.
(GRAPHIC-US fourth quarter revenue: https://fingfx.thomsonreuters.com/gfx/mkt/dgkvlqnqepb/Pasted%20image%201610146723283.png)
Rick Meckler, a partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey, said: “Stocks have already reflected good earnings prospects.”
Revenues from the energy and industrial sectors are expected to decline the most in the fourth quarter.
Although economically sensitive industries (such as those in recent months) have outperformed the market, they are still lagging behind technology in 2020, and in general, some people consider their valuations to be cheaper than other industries.
Many cyclical names belong to the “value” label, and investors have noticed that the Russell 1000 Value Index has narrowed the gap in the Russell 1000 Growth Index after the optimistic vaccine news release.
As the virus cases are still on the rise, many strategists expect a greater recovery in the second half of the year.
Lindsey Bell, chief investment strategist at Ally Invest, wrote in a report on Friday: “As companies gain clarity and ultimate confidence, the outlook for the second half of the year is likely to rise.”
Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey, said, however, the uncertainty surrounding the recovery makes obtaining information from the company even more critical at this stage, even if it is not “official” guidance.
She said: “This is very important for a market that is eager to turn around.”
(Reporting by Caroline Valetkevitch; other reporting by Lewis Krauskopf; editing by Alden Bentley and Cynthia Osterman)