The 4Q corporate earnings reporting season
The 4Q corporate earnings reporting season began this week in the United States (with Europe to follow at the end of January).
The positive surprises recorded during the previous reporting season prompted analysts to improve their forecasts for 4Q, that nonetheless remained cautious, allowing room for further surprises.
In light of the new restrictive measures put in place to contain the spreading of the virus over the winter months, analysts expect a modest reduction of earnings on a quarterly basis, that would keep the year-on-year change negative, at close to -9% in the US.
Flows of funds
Data on financial flows collected by the Federal Reserve (Financial Accounts) outlined a second consecutive increase of the wealth of families, to new record highs, in 3Q 2020. This will represent an important supportive factor in attenuating the effects of the weakening of the economy over the winter months, but also in allowing a potential acceleration of consumption next year, in view of the widespread diffusion of vaccines.
Government debt continued to increase, whereas the acceleration in the debt of businesses, recorded in the first half of the year, was confirmed as temporary. For businesses, Fed aggregates confirm the upside reversal of earnings, while also signalling that valuations have reached peak levels, based on top-down metrics.
After the sharp rebound of GDP in 3Q 2020, the recovery continues in China and in the United States, but has stalled in Europe due to the restrictive measures introduced by national governments to contain the second wave of the pandemic. However, the disruption will be temporary: beyond some possible tail-end effects at the start of the year, the recovery will regain momentum in 2021, thanks to new monetary and fiscal stimulus, and to the first doses of the anti-Covid vaccine becoming available.
Previews financial reports
The Q3 reporting season
China: the engine of global economic growth has restarted
The corporate earning report season
A marked increase in the wealth of households: in 2Q 2020 beat pre-coronavirus peak levels
2Q 2020 corporate earnings reporting season kicks off
Macroeconomic data: 1Q 2020
The 1Q reporting season
The US fiscal policy
The Fed and unlimited credit, a necessary condition for the economy to recover
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