As market sentiment continues to improve, Research Analyst Niamh O’Leary highlights progress on the next round of stimulus in the US, improving data on Covid 19 infections and strong earnings.
The recovery continues as equity markets push on towards new highs. Further progress on the next round of stimulus in the US, improving data on Covid 19 infections and build up in vaccination rates are giving greater confidence in the global economic recovery.
Earnings delivery is very strong. In the US earnings are up 2% YoY against an 11% drop expected. If we exclude the very troubled sectors: Energy; Transport; Industrials (read aerospace) and Consumer Services, earnings are up 11% YoY and that is off a normal quarter, not a recessionary one.
Policy developments remain positive. We are on track for the next fiscal package in the US and talks are starting for the recovery plan.
Fixed income markets remain under contained pressure. The US is weakest, not surprising given all the extra spending and the greatest potential to deliver an inflation surprise. However, we still seem to be going through the deflationary effects of the pandemic so it could be some time before we see inflation pressures rise.
