Jonathan Golub of Credit Suisse paints a more optimistic picture for US companies with the earnings season officially underway.
“It’s going to get better as we move forward through 2021 for their earnings,” the company’s chief US equity strategist recently told CNBC’s “Trading Nation”.
JPMorgan Chase, Citigroup and Wells Fargo kicked off the season on Friday.
“Overall they really crushed him,” Golub said. “You’re going to see the same thing, and you see it in all kinds of capital market activity and business activity – things related to interest income and so on.”
Overall, he thinks Wall Street is too pessimistic about the S&P 500 earnings growth this season. Refinitiv estimates it will drop 10% in the fourth quarter. Meanwhile, Golub’s forecast reflects a 4% drop in growth, and he doesn’t rule out a slight gain.
In a recent note on the earnings outlook, Golub wrote: “Exceptionally strong analyst reviews point to further rise in corporate earnings. On the other hand, history indicates that strong ISM readings, like the 60.7 of last week, are strongly correlated with beats. “
On “Trading Nation” last month, Golub had a more nuanced view. He wanted to wait for more clarity on policy under the Biden administration before making a major call. But with the Georgia Senate second-round results finalizing, he speculated that a blue wave would provide additional coronavirus help to the economy and help businesses.
In the first week of 2021, Golub raised its year-end forecast for the S&P 500 to 4,200 from 4,050, an 11.5% jump from Friday’s close. Not only did Golub refer to the blue wave, but he also listed economic reopenings and pent-up demand for his optimism.
The most underrated bullish story of the year?
According to Golub, the reopening of the trade became the most underrated market story of the year. He believes a breakthrough will come in the second half of the year when people emerge from immunized blockages again. He speculates that delayed medical care, concerts and even shopping at a mall will be high on their to-do lists.
“We’re going to see things really open up,” Golub said. “The economy could start.”