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Weekly Market Recap: Feb. 22, 2021

The week in review

  • Retail sales rose 5.3% m/m
  • Industrial production grew 0.9% m/m
  • Housing starts decreased 6.0% m/m
  • Existing home sales rose to 6,690K

The week ahead

  • Case-Shiller HPI
  • New home sales
  • 4Q20 real GDP (second estimate)
  • Consumer sentiment

Thought of the week

As the fourth quarter earnings season comes to an end, we are expecting operating earnings per share (EPS) of $35.15, down 10.3% from a year ago. In all, 81% of companies have beaten earnings estimates, and 68% of companies have beaten revenue estimates. Technology and health care companies continue to see profits rise, with year-over-year EPS growth of 27.2% and 8.8%, respectively.

At the other end of the spectrum, energy and industrials are expected to end the quarter with significant EPS contractions, which come as no surprise given the drop in oil prices and pullback in air travel and transportation. However, this story is evolving. Financials, which came under severe pressure in 2020, have showed signs of recovery as declining NIMs level out and credit metrics improve. Likewise, consumer discretionary is set to end 2020 on a positive note, with the sector’s EPS currently anticipated to grow 3.0% y/y.

Looking ahead, we expect both sectors, as well as the cyclical parts of the market more broadly, to see earnings growth outpace their growth counterparts in 2021. That said, while an economic recovery will boost earnings in 2021, investors should recognize that an overly rapid recovery could very well lead to strong wage growth, thereby weighing on margins and profits in 2022.

4Q consensus EPS

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Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

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JPMorgan Distribution Services, Inc., member of FINRA.

J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset Management, Inc. and JPMorgan Asset Management (Canada) Inc.

©JPMorgan Chase & Co., February 2021

Unless otherwise stated, all data is as of February 22, 2021 or as of most recently available.

Disclosure: J.P. Morgan

Past performance does not guarantee future results.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

The price of equity securities may rise or fall because of changes in the broad market or changes in a company’s financial condition, sometimes rapidly or unpredictably. International investing involves a greater degree of risk and increased volatility. There is no guarantee that companies that can issue dividends will declare, continue to pay, or increase dividends. Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage.

JPMorgan Distribution Services, Inc., member of FINRA.

J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset Management, Inc. and JPMorgan Asset Management (Canada) Inc.

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