Hopes for Rapid Q1 Economic Recovery Dampened
(18 January 2021 – Global) The global recovery in corporate revenues expected for Q1 2021 is at risk as intensifying COVID lockdowns and travel restrictions diminish hopes of a rapid economic rebound.
China announced lockdowns in four cities and European countries revealed tighter and longer COVID restrictions, denting hopes of a speedy return to normalcy as vaccines are rolled out and sparking concerns about further negative economic growth in 2021. There were doubts emerging in expectations of a V-shaped bounce back in corporate earnings as the pace of upward revisions in global earnings estimates slowed in recent weeks.
“While additional stimulus could provide upside risks, rising COVID cases suggest a more tepid recovery from here. We see risks of downward guidance this earnings season with a consensus on US profits that points to a drop of just three percent versus pre-COVID-19 levels in 2019” stated Bank of America Equity Strategist, Savita Subramanian.
“There is widespread hope that a COVID-19 vaccine rollout in 2021 can normalize the underlying real economy and increase earnings, employment and margins. The risk is that new mutations of the virus will dilute our attempt to normalise our society with the first-generation vaccine” said Saxo Bank Chief Investment Officer, Steen Jakobsen.