Earnings, earnings, earnings.

Earnings expectations were high heading into this reporting season, and companies have not disappointed. Year-over-year comparable earnings were easy to beat but uncertainty still lingered. The markets are absorbing the positive earnings news with relief and trending higher. So far 84.6% of S&P 500 reporting companies have beaten their EPS estimates. More than 75% of companies are likewise exceeding revenue estimates. Want more emerging earnings trends? Click here. 

The magnitude by which companies are besting earnings projections is shaping the larger forecasting chatter. While some market prognosticators see a frothy market, others see continued promise on the horizon. As earnings ultimately drive market performance, we are encouraged by the current pace of earnings growth so far this quarter.

Government stimulus.  

Fiscal stimulus has been off the charts since the onset of the pandemic, with an almost $6 billion price tag. As predicted, flush consumers are using their built-up savings, driving up current growth in GDP. Remember the U.S. consumer is the backbone of our economic picture, representing approximately two-thirds of our economy. With the current administration rolling out trillion-dollar plans, the spending splurge from the government appears to be full steam ahead.

Tax changes.

The government’s spending spree leads to an obvious question: “How do we pay the bill?”. The answer is likely a combo of higher taxes and greater IRS enforcement. Read more on the proposed changes here. Ultimately, we predict the tax overhaul will not be as all-encompassing as the current administration would prefer. Small margins in the House and Senate means it only takes a handful of tax-leery Democrats to slow down or amend the planned tax increases.