It was another strong week and investors across the board will be happy as yields continue to retrace lower and equities push higher. The S&P/ASX 200 rose 1%, whilst the S&P 500 rose 1.4%. Emerging markets were the laggard again as Chinese equities fell.
In the US, quarterly earnings kicked off with the big banks all blowing past estimates as investment banking and trading revenues surged thanks to the hot market and earnings soared on a reversal of loan provisions. Despite that, most banks finished the week mixed as investors were disappointed by weak loan growth and net interest margins remained under pressure. Tech was the best performing sector as yields weakened despite strong economic data.
Will 2021 be one of the best years?
Australians seem to think so. Last week saw the release of the monthly NAB Business Survey and Westpac Consumer Survey. The readings showed optimism was growing across the board.
According to NAB’s survey, businesses are more optimistic than they have ever been, whilst Westpac’s survey showed consumer sentiment at the highest in over a decade.
The result is likely a positive feedback loop driving growth momentum for the economy and for company earnings. Optimistic consumers will spend and buy more goods, businesses will look to meet demand by hiring more people which drives employment and more optimistic consumers.
Given such strength, we can expect further earnings upgrades, especially for the cyclical sectors such as financials, consumer discretionary, materials and energy. Indeed, these are the areas that have seen the highest positive earnings revisions so far this year and we expect that this will continue in the near-term.
The impact of the cessation of JobKeeper support will flow through in the next couple of surveys, but with readings so strong and the surveys generally forward looking, it is likely that the end of JobKeeper will not be an issue for an Australian economy with such strong momentum.
Monday 19 April 2021, 12.30pm
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This information is general in nature and is provided by Bentleys Wealth Advisors. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decision based on this information.