As market sentiment improves, CIO Bernard Swords discusses the strong fundamentals underpinning market gains last week as well as summing up Q4 2020 earnings season.
- Investors’ doubts disappeared quickly last week and equity markets have gone back towards the highs of January. The re-opening theme is back in vogue and has further to go, but prices are moving quickly. Policy developments, falling Covid-19 cases and increasing momentum in vaccinations were the main drivers.
- US fiscal policy is getting ever more expansive. We got a fiscal package earlier than expected in December and now looks like we will be getting another towards the top end of the range by March / April time as the Democrats decide to go it alone. This is key for the re-opening theme as much of the spending is geared towards plugging holes in the economy due to shutdowns rather than any new growth plan.
- The earnings season remains extremely positive. In the US earnings are now up 6% YoY and seven of the eleven sectors are delivering double digit earnings growth. With further stimulus to come the forecasts are likely like to rise further.
