April 5, 2021
Looking back on Q1, we had an economy that is estimated by the Atlanta Fed to have grown at a 6% annual rate.
With that, the banks will kick off earnings season next week, and we will begin to see what 6% economic growth looks like in corporate earnings. And those earnings will be compared to against against a very low base of Q1 2020 — the quarter that included the onset of the pandemic and economic shutdown.
Spoiler: The earnings growth is going to be huge.
On a related note, even though the estimates on earnings have been ratcheted up by both Wall Street and corporate America, history tells us that earnings estimates are set to be beaten. We should expect to see big positive surprises from the first quarter. That will all be more fuel for stocks.
And this comes in the month of April, which historically is a very good month for stocks (up 15 out of the past 15 years).
Keep in mind, this first quarter includes just a small fraction disbursed of the latest $1.9 trillion. With more of this money hitting in the coming quarter, Q2 growth (in GDP and corporate earnings) is going to be mind-blowingly big. The corporate earnings will be measured against the deep trough of the economic recession.
I'm away for the remainder of the week, spending Spring Break with the family. You won't see a Pro Perspectives note from me until next Monday.
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Have a great week!