USA Inc is vastly exceeding expectations. First-quarter earnings reported as of last Friday had beaten analysts’ forecasts by a mammoth 30%; usually “earnings beats” are about 3%-6%, says Bob Pisani for CNBC. The unprecedented uncertainty triggered by the pandemic caused many blue-chip firms to withdraw their guidance last year. That prompted the analysts who study these firms to make very conservative forecasts for the earnings outlook, which were widely thought to be too pessimistic. Most people expected this quarter’s earnings to be good, “but this is really good”.
US stockmarket valuations are historically high on a cyclically adjusted price/earnings ratio (Cape) of 34.6, according to Mebane Faber of Cambria Investment Management. Strong earnings are one way of bringing those valuations down to a more reasonable level. Bank earnings have been especially impressive, says The Economist. JPMorgan Chase reported record revenue in the first three months of the year. Profits have tripled in a year at Citigroup and doubled at Bank of America. For the first time since 2008 banks are reporting returns on equity above 20%. They have profited from the first quarter-market frenzy, which saw massive trading by ordinary retail investors and frenetic activity on the mergers front. Goldman Sachs enjoyed a 40% yearly jump in its advisory fees.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Thousands more pay inheritance tax with figures expected to double before decade’s endNumber of deaths triggering inheritance tax rose 13% in a year with more increases predicted as Rachel Reeves’ pension reforms apply from April 2027
-
Should you invest in Microsoft?Microsoft is set to become the second company in the world to reach a $4 trillion valuation. Is now a good time to invest in Microsoft?
-
How to use SAYE and SIP schemes to multiply your moneyEmployers’ savings or share-incentive plans like SAYE and SIP schemes can help top up your pension
-
The new products and growth sectors driving America’s long-term winnersOpinion Felix Wintle, manager of the VT Tyndall North American Fund, highlights three favourite US stocks where he'd put his money
-
AJ Bell: a fine British fintech going cheapOpinion Don’t overlook investment platform AJ Bell, a significantly undervalued British business with an excellent financial base
-
Tariffs 'were a terrible idea but shunning the US is a big mistake'Opinion Manufacturers and investors have pivoted away from the US, the world’s biggest economy. That’s a mistake, says Matthew Lynn
-
Investors remain calm as the Middle East war unfoldsConflict in the Middle East has failed to shake oil or stock markets. Can the peace hold?
-
The British railway industry is in rude health – here's why investors should jump aboardThe railway industry has bounced back from the devastating impact of the pandemic and is entering a new phase of development – and profitability
-
US and China reach a ceasefire in their trade war after talks in LondonThe US and China's trading relationship – the most important one in the global economy – is back on track. Will the truce last?
-
Infrastructure investing: a haven of stable growth amid market turmoilFrom booming construction in emerging markets to digital and green transitions, the infrastructure sector offers security, returns and long-term opportunities
