News, Views & Truths (12/04/21)

Published on: April 12, 2021

Good morning, everyone and I hope you have all had a great weekend.  Without any further delay, welcome to this week’s News, Views and Truths.

And in the spirit of positivity created this day through the reopening of pubs and hairdressers (you can’t have one without the other, can you?), this week’s edition will be crammed full of positive views.

Starting off with Jerome Powell, Chairman of the US Federal Reserve.  His interview overnight in the States was buoyant to many market participants.  

Despite what he sees as a rapidly recovering economy, he reaffirmed the Central Bank’s commitment to keep loose monetary policy in place and included a statement of near-certainty that interest rates won’t be going anywhere:

“I’m in a position to guarantee that the Fed will do everything we can to support the economy for as long as it takes to complete the recovery,” he stated.

But Powell did reiterate that more needs to be done, particularly for those in the lower-income brackets who have suffered the most: “We don’t have the answer to everything, but the job that we do for the benefit of the public is incredibly important, and we do understand that if we get things right, we can really help people,” he said. “If the people who are at the margins of the economy are doing well, then the rest of it will take care of itself.”

However, he did go on to state that risks remain.  Rising Covid cases in the US remains a concern and he said people should continue to wear masks and physically distance to keep the recovery going. 

One thing he is not worried about, however, is inflation, which in the US is running around 1.6% now and remains well below the Central Bank’s 2% target. The Federal Reserve has pledged to keep rates low, even if inflation would run somewhat above the target rate for a period of time.

When it comes to inflation, Powell stated he would “like to see it on track to move moderately above 2% for some time. When we get that, that’s when we’ll raise rates.”

Looking further into this week, earning season in US stocks gets underway and the market will begin to see first hand whether or not the growth in stock prices during the first quarter of 2021 is justified.

The big banks kick off the reporting Wednesday, with JPMorgan, Goldman Sachs and Wells Fargo. Bank of America and Citigroup report Thursday. Morgan Stanley reports Friday. PepsiCo and Delta Airlines are also among the first to report.

The consensus for the first quarter is earnings should be up roughly 22% and, expectations are, that the most earnings beats will be in the cyclical sectors, like consumer discretionary, financials and materials; all sectors that benefit from the reopening economy.

Based on estimates and early reports, Refinitiv now expects earnings growth of 25% for the first quarter. Companies have been beating estimates so far, at a pace of 81%. Earnings for the financial sector are expected to be up 76% and the consumer discretionary sector, which was hit hard by shutdowns a year ago, is expected to deliver a bounce-back of 98%. 

And so, once again, positivity is the name of the game this week; we shall see how it all unfolds with eagerness.

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