Good morning, everyone; I hope that you all had an excellent, slightly re-opened, weekend and are looking forward to the week ahead. Let me ease you in gently with this week’s News, Views and Truths.
Last week’s global market was, on the whole, extremely positive. Looking across Europe firstly, shares rose pretty broadly across the region, with the pan-European STOXX Europe 600 Index posting a seventh consecutive week of gains, rising 1.20%. The FTSE 100 increased 1.5%, pushing into 7,000 for the first time since the global pandemic, along with the German DAX rising 1.48% and the French CAC 40 adding a further 1.91% over the week.
Across the pond in the US, a similar story played out with most of the major benchmarks recording their fourth consecutive week of gains. With a continued rotation from growth stocks to value, the tech-heavy Nasdaq and small-cap Russell 2000 indices slightly lagged the large and mid-cap indices but continued to deliver positive figures. As a point of reference, the US Dow Jones Industrial has returned 11.74% year to date, with the Nasdaq delivering 9.03%.
Looking forward to the week ahead, performance will no doubt continue to be driven by earnings announcements, especially after stellar reports from the US banks last week. Netflix will be the first of the FAANGs (five most popular US tech companies) to report earnings, with expectations being particularly strong and, one week into earnings season, companies beating earnings estimates by a wide margin of more than 84%, according to Refinitiv.
This three-month period is the first to be compared to year-earlier profits that were affected by the pandemic. Profit growth for the S&P 500 is 30.2% for the quarter so far, based on both actual reports and estimates, which makes it the best three-month period since the third quarter of 2010, according to FactSet.
What will be of interest, is the margin pressure on earnings from higher commodity prices, supply chain issues and other cost factors. This will naturally create more pressure upon industrial companies rather than tech-biased stocks and financials; earnings commentary should provide greater insight into the growing inflationary concern that seems to be steadily stalking investors.
On that note, US Consumer Price Inflation for March showed a pick-up in headline inflation to 2.6% year on year, with a 9.1% jump in petrol prices contributing to the gain. As we have been stating for 12 months now, the market will continue to shift its attention to this and all investors should be prepared for an ever-increasing inflationary backdrop.