Corporate Profits
According to BCA Research’s European Investment Strategy service, the money sloshing around the financial system from pandemic-era stimulus measures disconnects near-term prospects for growth from risk asset prices. As a result, we are witnessing an odd…
Chinese industrial profits rose by 4.0% y/y in April, from a 3.5% y/y contraction in March. They grew by 4.3% in the first four months of the year, compared to the same period in 2023. In March, the central government pledged funds to incentivize…
The Q1 2024 earnings season is drawing to a close with 93% of S&P 500 companies having reported results as we go to press. Three-quarters (two-thirds) of companies have topped earnings (sales) expectations in Q1, according to Factset. Next quarter’s…
Q1 Earnings and sales growth were strong, but the devil is in the details: Without the Magnificent Five, earnings growth for the index would have been negative. On a positive note, margins have stabilized, and earnings growth is expected to broaden into yearend. Companies are optimistic about the economy. Development of AI applications is in full swing, but few companies are monetizing them yet. Consumer spending is strong but is slowing. We reiterate our underweight of consumer sectors, and overweight of Software and Services as the “don’t fight AI” adage holds.
An adverse shock is not a recession prerequisite. The empirical record shows that the US economy regularly evolves its way into a contraction with little fanfare. If current cooling trends continue, we project a recession will begin in late 2024/early 2025. …
Health care stocks have underperformed the US broad market by over 20% since the beginning of 2023. Indeed, vaccination campaigns during the pandemic years had initially boosted health care companies’ earnings. However, this tailwind eventually faded.…
Chinese investable stocks have rallied on a combination of investors’ hopes for stimulus, revival in the global manufacturing cycle and cheap valuations. The MSCI China index and the Hang Seng have both gained close to 15% since mid-April. However, our…
After underperforming in 2022, I.T., Consumer Discretionary and Communication Services – the three sectors encompassing America’s largest tech companies – have rallied by 61.3%, 41.4% and 73.7%, respectively, since the beginning of 2023. Crucially, their…
EUR/USD has fallen by almost 5% since July last year. There are fundamental reasons why this move has taken place. The US economy has shown significant more resilience than the European one. Consumption continues to be strong, and GDP is still growing at a…
According to BCA Research’s US Equity Strategy service, Q1 earnings results signaled that net interest income (NII) growth is set to decline in US banks. For nearly two years, America’s largest banks enjoyed a surge in NII thanks to rising rates and the…