The first-quarter earnings season highlights once again that consensus expectations for corporate profits have been too conservative as the world recovers from the pandemic. Near-term expectations are being revised higher.
What you need to know
The first-quarter earnings season has been much better than expectations, with almost all regions and sectors beating consensus earnings and sales forecasts.
Markets have reacted positively to strong beats in more cyclical sectors – especially financials – but strong beats in technology have not been rewarded. This is a sign that the market remains in rotation mode for now as it shifts from rerating covid winners to recovering covid losers.
Our view remains that after an initial rerating of covid losers, the market will once again become more selective, favouring companies in industries with attractive competitive dynamics, innovative business models, and with solid cyclical or structural growth prospects.
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