The U.S. economy, as measured by real GDP, accelerated in 1Q21, recording an annualized increase of 6.4%. Almost a year removed from the 2Q20 contraction of -31.4%, it is clear that the economy is in the midst of a swift, consumer-driven recovery; this latest reading is the third consecutive quarter of above-trend growth, following strong GDP prints in 3Q20 (+33.4%) and 4Q20 (+4.3%). Under the hood, 1Q21 personal consumption expenditures rose at a SAAR of 10.7% with the goods and services components up 23.6% and 4.6%, respectively.
Strength in the services sector was driven by increasing vaccinations and gradual return to normalcy, as evidenced by solid q/q growth in air transportation (+11.5%), accommodations (+9.5%) and food services (+5.8%). Recent market performance has also been stellar, with the S&P 500 and NASDAQ indices hitting record highs last week on the back of a blowout 1Q earnings season. The quick rebound in the U.S. economy and equity market has directed increased attention to the Fed. For now, the Fed remains accommodative, electing at the most recent FOMC meeting to once again not adjust the target federal funds rate and reaffirming its commitment to asset purchases until “substantial further progress is made.” However, Chair Powell did highlight the vaccination campaign and fiscal stimulus as the primary drivers of the recovery and even noted improvements in the sectors hardest hit by the pandemic. As a result, with the backdrop of a robust recovery, investors should be positioned for higher yields as strong growth and higher inflation are realized in the quarters to come.
— JP Morgan
Global Spotlight
Scotland decides its future. Scotland will hold a parliamentary election May 6, and the governing Scottish National Party has promised that if it wins (as polls suggest it will), it will ask the British government for a second independence referendum.
Israel and Lebanon resume maritime border-demarcation talks. After a four-month hiatus, Lebanon and Israel will resume talks on their disputed maritime boundary. U.S. mediator John Desrocher will be present at the talks, which will take place at the U.N. base in Naqoura near the Israel-Lebanon border.
State election results in India. India will announce the results of five state or union territory elections May 2. The elections are outside the ruling Bharatiya Janata Party’s heartland, but several are states where Prime Minister Narendra Modi and the BJP are hoping to expand their presence.
Japan and South Korea meet with the United States on the G-7 sidelines. Sources indicate that the foreign ministers from the three allies plan to hold discussions during their mutual attendance at the May 3-5 U.K.-hosted summit, which will also feature U.S. President Joe Biden’s first overseas visit.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Weeks Numbers
Review Last weeks numbers here.
Jill Mislinksi, from Advisor Perspective, points out, the S&P 500 rose two out of the last five days and closed Friday up 1.11% from Thursday. The index is just 0.11% below its record close and is up 11.3% YTD.
Last week we had a very narrow range, this could point to a break out if there is significant volume above 4200.
Earnings
Source I/B/E/S data from Refinitiv
Aggregate Estimates and Revisions
- 21Q1 earnings are expected to be 46.3% from 20Q1. Excluding the energy sector, the earnings growth estimate is 47.4%.
- Of the 303 companies in the S&P 500 that have reported earnings to date for 21Q1, 87.1% have reported earnings above analyst expectations. This compares to a long-term average of 65% and prior four quarter average of 76%.
- 21Q1 revenue is expected to be 11.6% from 20Q1. Excluding the energy sector, the growth estimate is 12.8%.
- During the week of May 3, 139 S&P 500 companies are expected to report quarterly earnings.
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