In this week’s Market Pulse, Chief Investment Officer Bernard Swords reflects on positive economic data fuelling market activity as Q1 reporting season kicks off to a strong start. 

• The last few weeks have given some clues of what the world could be like as Western economies move towards re-opening. In the US we had the strong payrolls data a few weeks ago and last week we had the ballistic Retail Sales figure, almost 10% growth at the headline level. The US is going to take the lead in the global economy in the second quarter. Meantime the old leader, China, sees some levelling off. The actual growth figures are still large but not any bigger than expected. The US will still look like it is in the early stages of recovery and China looks like it might be moving into the mature stages of its recovery.
• Another feature that was apparent in the recent data is the leadership of the Consumer and Consumer Services in particular. We believe this theme will gather further momentum in the next few months.  
• Probably the most pleasing aspect of the last week was the drop in bond yields led by falls in the US. This is despite the very strong economic data we have been getting. We do expect higher bond yields in 2021 but with the central banks in the background we always believed this would be a limited and orderly rise. Developments over the last week give support to that view. A calmer bond market along with strong earnings and economic data will give good support to equity markets.
• The Q1 reporting season is underway and it is off to a strong start. This is pleasing as the first week is normally the toughest. For the first quarter, EPS is expected to rise 27% for the S&P500 and almost 38% in the euro area. This will be a unique reporting season as forecasts have been increased going into it – usually analysts are revising down their forecasts at this stage.