The stock market is running hot in the first quarter of the earnings season.
A formidable march has lifted the S&P 500 by 9.9% this year to 20 record highs, keeping share valuations at historic highs. However, some investors believe that equities will have more room to execute, as the rollout of Covid-19 vaccines and large government spending boost the prospects for corporate profits.
The earnings season kicks off this week with results from America’s major banks – including JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co – and companies ranging from Delta Air Lines Inc. to PepsiCo Inc. and UnitedHealth Group. Inc.
Investors will monitor signs of confidence from managers that customer demand will continue to rise and that cost increases can be managed to alleviate their concerns that stocks seem expensive.
The S&P 500 traded 22.6 times its forecast earnings over the next 12 months on Thursday, above the five-year average of 18.14, according to FactSet. Paying, even for shares of high-quality companies, increases the prospect of muted future returns for shareholders.