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RECOVERY MONITOR: recovery on track, but at a slower pace.
The Delta variant is not blocking the recovery, that is still on track in the major countries, although at a slower pace than over the spring. The Eurozone, where Covid infections have been fewer, is proving more resilient. In the next few months, supply-side bottlenecks could result in a sharper slowdown than expected, but do not seem serious enough to block the recovery for as long as monetary and fiscal policies remain sufficiently accommodative.
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USA, Flow of Funds Account – Households’ wealth at record-high levels. Solid balance sheets for businesses as well
Households’ wealth at record-high levels, driven by the stock market and by property prices. Solid balance sheets for businesses as well: earnings on the rise and financial leverage down to below pre-Covid levels.
Data on financial flows provided by the Federal Reserve’s Financial Accounts outline, in 2Q 2021, a sharp increase in the wealth of households, to new record-breaking levels, whereas debt in relation to disposable income (also thanks to fiscal stimulus) is below pre-Covid levels.
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Earnings growth and upside surprises at record-breaking levels in 2Q 2021 as well
The 2Q reporting season is close to its completion in the US and in the Eurozone.
Again, results were exceptionally strong: earnings growth, upside surprises, and company margins all grew at record-breaking rates. Excellent corporate results have prompted analysts to further revise up their forecasts for future earnings growth both in the US and in Europe.
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Recovery monitor 2Q: expectations for a synchronized recovery in the major economies
Recent data confirm expectations for a recovery in the Eurozone in 2Q and an acceleration of growth in the US, as opposed to an ongoing slowdown in China. The resurgence of Covid infections tied to the spreading of the Delta variant should be kept under watch. The risk is a slowing of the recovery in the next few months, although (thanks to
the protection offered by vaccines) a derailing does not seem likely for the time being.
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Q2 business profits reporting season in the U.S. and Europe
Mid-July, in the U.S. and Europe, the company profit reporting season for Q2 will start. Analysts revised again in an upward trend the esteems of profit growth, basing their assumptions on the record data in the yearly profit growth (above 60% for the S&P500) and revenues (almost at 20% for the S&P500). Esteems on quarterly growth remain modest instead.
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Q1: Corporate results are among the best recorded in the past 10 years
The 1Q 2021 reporting season is coming to an end in the US and in the Eurozone. Corporate results are among the best recorded in the past 10 years, thanks not only to strong year-on-year earnings growth (+45% and +50% respectively per S&P500 and EuroStoxx), driven by a statistical comparison effect, but also to a number of earnings surprises at their highest for the fourth consecutive quarter. In addition, the outlook for the remainder of the year, as outlined by businesses, is for a further improvement.
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Recovery monitor - Q1 2021
The reporting season confirms the US’ recovery path, along with China’s growing GDP: good news from the Eurozone, which is also beginning its recovery journey, even if later than others. High-frequency indicators back up the alleged recovery by these economies. Discover our experts’ analysis in this scenario!
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It’s beginning in the US the earnings reporting from Q1
This week in the US (and Europe towards the end of April) will begin the business earnings reporting season for the 1st quarter. After many positive surprises from the last three seasons, the progress of vaccination campaigns and fiscal policy stimuluses, analysts have increased their expectations on earnings growth (to a yearly 24%) and profits (to 6%) not only for the 1st quarter, but for all of 2021.
The future numbers up for publication in the next days will tell us if analysts kept on maintaining an overly cautious profile, despite the increasing expectations. This is still probable, considering the economic recovery has always been seen as increasing after data-led improvements, especially the ones from the end of the quarter.
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Recovery monitor
Nowcasting models are showing a constant performance distancing between the US and China (expanding) and the Eurozone (contracting, due to slowness in vaccinations). But this distance should be closed during the spring.
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USA, Flow of funds
Family patrimonies reached new record levels thanks to stocks, real estate value and fiscal stimulus. New highs for stock evaluation indices as well.
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China: after Covid’s air pocket the goal is a “quality” growth of at least 6%
Yesterday the press conference held by Chinese PM Li Kequiang ended with the closing of the National People’s Congress (NPC), which is along with the Chinese People's Political Consultative Conference (CPPCC) part of the “two sessions” (lianghu in Mandarin), the two main institutional assembles designed to receive the CCP’s directives and create China’s future economic and political direction.
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