29 luglio 2021

Market Commentary: Q2 reporting season is doing well but annual growth has peaked

In breve

As the reporting season is close to 50%, positive surprises are appreciable. Indeed, expectations on quarterly growth were flat providing good positive revisions, given the upgrade of the economy in the last three months.

Market Commentary

Highlights:

As the reporting season is close to 50%, positive surprises are appreciable. Indeed, expectations on quarterly growth were flat providing good positive revisions, given the upgrade of the economy in the last three months.
Margins are on the rise as capacity utilization is increasing and unit labour costs are still under control.
Such positive revisions ultimately increase the fair value of equities more rapidly than expected, with additional support coming from lingering low yields. We see total returns of 6% in 12 months for EMU and 4% for the US.
That said, Q2 will represent the peak of the yearly earnings growth in this cycle. This is due to a less positive base effect in the quarters ahead, toppish economic acceleration and confidence indicators in addition to the peak in policy support.
For this reason, we maintain a prudent OW in equities, with only a slight OW of EMU vs US and a more defensive sector allocation within Europe.

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Market Commentary: Q2 reporting season is doing well but annual growth has peaked

29 luglio 2021

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