July 13, 2021
Earnings are beginning to roll in for Q2 for many US companies. The expectations are soaring through the roof as analysts' consensus is 64% growth for the S&P 500. For banks, earnings are expected to grow by 80%. However, UBS strategists said that pandemic responses and the government’s response are driving profit surges and expectations. They lifted their year-end S&P estimate to 4,500. P/E ratios are very high and well above recent moving averages, but low-interest rates help justify these valuations. UBS says investors should tilt toward consumer discretionary, energy, and financials. And that value is more attractive as growth P/E is elevated to near dot com levels. Goldman and J.P. Morgan's earnings growth came in hot, beating expectations, and financials remain a consistent revenue generator.
FINSUM + Magnifi: Our view here is that earnings estimates are so high that there is a much bigger risk of disappointment than positive surprises.
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