Market Update Week 15
This week marks the beginning of earnings season. This means that publicly traded companies will start to publish their 1st quarter results. Investors will get to see if the companies they hold performed according to expectations or if they missed the mark. The analysts consensus is that the overall market will have increased earnings compared to that of the 1st quarter of 2020. It may sound like a repetition, but Jerome Powell remarked last Sunday that the U.S. economic outlook improved substantially and the Fed is not planning on raising interest rates this year. Although the Fed said multiple times that it is not planning on raising interest rates in the near-term, consumer sentiment is otherwise. According to a consumer expectation survey conducted by The Federal Reserve and Bank of New York in March, Americans believe that inflation will rise about 3.2% over the next 12 months.
Although the economy is recovering and the stock market is rising, there is (still) a discrepancy between the two. The market has been walking ahead of the economy for a while now but these two must converge at a point in time. This leads some to think that either there will be a market correction or the GDP rate will increase dramatically. Both seem reasonable. As was mentioned in previous newsletters, in case of a correction value stocks are likely to increase (significantly) while the overall markets fall. It depends on what side of the line you are when the correction comes.