What can you expect from the US results season?

American companies are starting on the path to recovering their profits. According to forecasts, earnings per share will increase by 25% compared to the same period of the previous year. Revenues, according to analysts, will be 9% higher than in the first three months of 2020. 

Besides these encouraging forecasts, the expectations for some sectors are even better. Analysts have high hopes for cyclical parts of the market, such as consumer stocks, finance, and natural resources. The improvements are mainly due to the magnitude of the collapse in economic activity last year.

What companies will lead the way?

The results season has only just begun. As always, some of the big banks are among the fastest-growing firms. Analysts expect that solid commercial activity, combined with the release of loan reserves, will boost earnings. Many lenders made sizable provisions if the loans they made in the early days of the Covid crisis went wrong. However, their planning turned out to be too pessimistic, as many companies subsequently received government aid. It meant that they did not have to default on their financial obligations.

In the fourth quarter, we saw some of the big banks start releasing their reserves. The first data from entities such as JP Morgan, Wells Fargo, and Bank of America indicate that this process continued between January and March. There were also hopeful signs of improvement in trading figures among investment banks. Goldman Sachs has noted that there has been increased activity in both its fixed income and equity divisions.

In the meantime, many investors will wonder what’s new in Big Tech and other large-cap companies. To know these figures, we will have to wait until the end of April. That’s when a large number of S&P members, representing an even larger share of the total US market capitalization, will disclose their benefits.