Investors traditionally pay less attention to the results that companies present in the first and third quarters of the year. In fact, there are already markets in the European Union where listed companies are only required to report their accounts each semester.
Despite this, the earnings season that starts in the next few days on both sides of the Atlantic has great relevance for analysts, since it is the first quarter where the most severe lockdowns had ended. Therefore, earnings changes will realistically reflect the recovery process in Europe and the United States.
In this context, the forecasts made are very positive. Specifically, this earnings season predicts a quarterly growth of 50%, which will lead both the S&P 500 and the Stoxx 600 to recover this year everything lost with the Covid crisis. If materialized, these good prospects will give the investor an increase in earnings per share of approximately 50% on both sides of the Atlantic.
Everything points, therefore, that stocks will continue to rise. But it is recommended that the promising outlook that equities is drawing does not cause the investor to ignore the risks that exist in this “new normal” of business results. The most important of these is inflation, the increase of which, still considered temporary, could force both the Fed and the ECB to normalize their monetary policy more quickly.
The first season of results after the lockdowns will reflect the reality of the recovery process
It is therefore necessary for savers to show adequate caution in the face of the strong impact that a return to central bank orthodoxy would have on the economic recovery and on company prices.