Highlights:

• The Q4 2020 reporting season started and more than 60 US firms reported quite upbeat quarterly results. Surprises are very positive especially for earnings (27%). They are better than Q3 ones (16%) and the last 9 quarters’ average (10%).
• In particular, financials, industrials, discretionary and tech did better than the sector average.
• Sales surprise is lower but still positive at 3.3% and better than in Q3 (2.8%) and the last 2 years’ average (1.2%).
• Yearly growth, for both earnings and sales, is flat (but higher than in Q3), and well in positive territory for materials, discretionary, staples and financials.
• Q4 earnings revisions are bottoming out (US better than EU in yoy terms) and Q1 ones outright increasing. 12-m forward earnings revisions are coming back from a cyclical peak but remain in positive territory.
• Macro recovery, USD weakness and higher oil prices are helping the S&P 500 momentum while EA suffers more from weaker GDP revisions and stronger euro. On the other hand, the good Chinese momentum bodes well for export-oriented economies, EU included.
• US fiscal stimulus will continue to add to GDP and earnings revision, benefiting indirectly also other indices like EMU or Japan. Upside pressure on US yields will bode well for a continuing rotation into Value and to a lesser extent Cyclicals, especially outside the US, where valuations are cheaper.
• Overall we continue to see total returns in the range of 5-9% in 12 months (US 5%, EMU 6.8% and EM 9%).

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