As we gather with friends and family to celebrate Easter, we want to take a moment to extend warm wishes to everyone, regardless of their beliefs or traditions. This special time of the year often symbolizes renewal, hope, and togetherness, values that resonate with many people across diverse backgrounds. We hope that this Easter brings joy, reflection, and an opportunity for all to connect with loved ones, as well as to appreciate the beauty and meaning of the season. Happy Easter to all!
The financial sector has experienced a surprising expected EPS growth of 5.2% for Q1 2023, despite recent events impacting banks. In 2022, the sector saw declining EPS across all quarters due to increased credit loss reserves and a slowdown in capital markets activity. While regional banks face scrutiny, larger banks such as JPM, GS, MS, and BAC are likely to fare well if a worse-than-expected recession is avoided and capital market activity returns to normal. The big banks are expected to report their Q1 2023 earnings between April 12th and April 14th. Factors such as a lower federal funds rate, a return to a normally-shaped yield curve, and easing mortgage fees may contribute to improved performance for these banks. However, investors should approach this information with caution, as past performance is not indicative of future results, and opinions can change rapidly.
Yield Outlook Shift
Marginally higher yields seem more likely, with a significant move to lower yields requiring a geopolitical event. The potential for “stable to slightly lower” yields exists, but a substantial move to higher yields appears more probable, causing a slight bearish stance on Treasuries. However, future bullishness, accompanied by risk-hedging options, is a possibility. The 2s vs 10s curve inverted further last week, and the market is likely to price in rate hikes and prolonged higher rates from the Fed. This outlook has low conviction, as the market currently challenges the Fed’s stance and prevails.
Global Spotlight
Yemen Cease-Fire Talks A Saudi-Omani delegation is set to meet with Houthi rebel officials in Sanaa the week of April 9 to discuss a permanent cease-fire in Yemen. The development suggests that the ongoing rapprochement between Iran and Saudi Arabia could be impacting decisions made by Yemen’s warring factions. Despite multiple temporary cease-fires in recent years, a permanent truce has remained elusive for the Yemeni government and Iran-backed Houthi rebels.
French Pension Reform On April 14, France’s Constitutional Council will rule on the constitutionality of President Emmanuel Macron’s controversial pension reform and the admissibility of a request by left-wing groups for a referendum on the issue. Unions and various political groups have expressed strong opposition to the reform, which raises the retirement age from 62 to 64. Nationwide protests are planned for April 13, ahead of the ruling.
Biden’s Northern Ireland Visit U.S. President Joe Biden will travel to Belfast, Northern Ireland, on April 11 to commemorate the 25th anniversary of the Good Friday Agreement. The visit follows a recent Brexit deal compromise between the British government and the European Union. British officials reportedly hope to use Biden’s visit to initiate discussions on a potential UK-US trade deal, although significant obstacles remain.
Lula’s China Trip Brazilian President Luiz Inacio Lula da Silva will meet with Chinese leaders, including President Xi Jinping and Prime Minister Li Qiang, during a visit to China from April 12-14. Lula aims to strengthen relations with Brazil’s largest trading partner after a tense period under former President Jair Bolsonaro. The Brazilian delegation is expected to negotiate streamlined sanitary measures for beef exports, among other agreements.
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 Week’s Numbers
Review Last week’s numbers here.
Earnings
Aggregate Estimates and Revisions
- 23Q1 Y/Y earnings are expected to be -5.2%. Excluding the energy sector, the Y/Y earnings estimate is -6.7%.
- Of the 20 companies in the S&P 500 that have reported earnings to date for 23Q1, 100.0% have reported earnings above analyst estimates. This compares to a long-term average of 66.3% and prior four quarter average of 73.5%.
- During the week of Apr. 10, ten S&P 500 companies are expected to report quarterly earnings.
Earnings expectations for 23Q1 reveal a year-over-year decline of 5.2%, or a 6.7% drop when excluding the energy sector. So far, all 20 S&P 500 companies that have reported earnings for 23Q1 have exceeded analyst estimates, surpassing the long-term average of 66.3% and the previous four-quarter average of 73.5%. In the coming week, starting April 10, an additional ten S&P 500 companies are slated to release their quarterly earnings reports.
Source I/B/E/S data from Refinitiv
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