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Charting the Market: Previewing a Pivotal Q1 Earnings Season


Head of SPDR Americas Research

  • Expectations are high for the first earnings season on the road to recovery; can firms deliver?
  • Global equities have rallied for 5 consecutive months. Will this earnings season stall the rally or help extend it?

The 2021 first quarter earnings season will provide an updated glimpse into how firms around the world are navigating the recovery and the reopening of economies. After all, this will be the first quarter of earnings data covering a time period simultaneously featuring more broad-based vaccine distributions and the relaxation of certain capacity restrictions.

The results are also occurring at a time where global equities have rallied for five consecutive months, and broad-based valuations are seemingly stretched relative to historical levels (97th percentile).1 And while the broad market has rallied, certain segments at the sector level have rallied more than others based on their relationships to the macro factors propelling this rally (e.g., cyclicals and rates).

Combine these factors together and it is a pivotal earnings season. If growth disappoints, the rally may stall. If growth follows the latest sentiment, then the rally could be extended. In this month’s Charting the Market, global earnings trends will be analyzed ahead of results being released, providing insights into what to expect for the first earnings season on the road to recovery.

Sentiment is positive with upgrades made globally

In the US, over the last few months, analysts have upgraded first quarter earnings-per-share (EPS) growth expectations for S&P 500® firms by the largest margin ever, boosting estimates by 6%. This is in stark contrast to the historical analyst revision trends in the preceding months to the first quarter earnings season, as expectations have historically declined as shown below.
S&P 500 Change in Quarterly Estimates in Prior 3 Months (%)

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1Based on the MSCI ACWI Index price-to-earnings ratio, 1995-2021 per FactSet data, as of April 1, 2021.


Earnings Per Share (EPS)
A profitability measure that is calculated by dividing a company’s net income by the number of shares outstanding.

A free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the US and Canada.

MSCI Emerging Markets Index
A free-float-adjusted market-capitalization-weighted index that is designed to measure large- and mid-cap equity market performance of emerging markets.

Price-to-Earnings Ratio (P/E)
A fundamental ratio comparing the current price of a stock to the earnings-per-share of the firm

S&P Kensho New Economies Composite Index
The index is designed to capture companies whose products and services are driving innovation and transforming the global economy through the use of existing and emerging technologies, and rapid developments in robotics, automation, artificial intelligence, connectedness and processing power (“New Economies companies”).

S&P 500 Index
A popular benchmark for US large-cap equities that includes 500 companies from leading industries and captures approximately 80% coverage of available market capitalization.

S&P 500 Growth Index
A market-capitalization-weighted index developed by Standard and Poor’s consisting of those stocks within the S&P 500 Index that exhibit strong growth characteristics.

S&P 500 Value Index
A market-capitalization-weighted index developed by Standard and Poor’s consisting of those stocks within the S&P 500 Index that exhibit strong value characteristics.

S&P SmallCap 600® Index
The S&P SmallCap 600 seeks to measure the small-cap segment of the US equity market. The index is designed to track companies that meet specific inclusion criteria to ensure that they are liquid and financially viable.

Originally Posted on April 9, 2021 – Charting the Market: Previewing a Pivotal Q1 Earnings Season


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Value stocks can perform differently from the market as a whole. They can remain undervalued by the market for long periods of time.

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