The sector had a monster 4th quarter of 2020. Here’s is one chart from YCharts on the Q4 ’20 performance of two Financials reporting this coming week, both of which are owned by clients.
Schwab (NYSE:SCHW) had a robust rally in Q4 ’20 as did JPMorgan (NYSE:JPM) both trouncing the Q4 ’20 return for the S&P 500.
Let’s review the S&P 500 data as this is the first new week of the quarter:
- The forward 4-quarter estimate jumped to $167.58 this week as the new 4-quarter period is now Q1 ’21 through Q4 ’21 or calendar 2021. The old period was Q4 ’20 though Q3 ’21. Last week’s forward 4-quarter estimate was $159.02 so the sequential increase was 5.34%.
- The PE ratio on the forward estimate remains 23x versus 23.6x last week;
- The S&P 500 earnings yield jumped to 4.38% vs 4.23% this week, with the sequential increase in EPS being greater than the S&P 500 rally this week;
- The “average” EPS increase for 2020 and 2021 is still 3%.
Summary / conclusion: It’s 7:30 pm on Friday, January 8th, 2021 and because i want to get out of the office, this write-up will be exceptionally short. More will be written over the weekend.
In one of the more tumultuous weeks in recent history with the Georgia Senate runoffs and the rioting in DC, the S&P 500 still managed to finish up 1.8% on the week.
This week has to be one of the classic examples of “ignore the headlines, and watch the price action”.
Investors could be looking down a double-barreled shotgun of vaccine acceleration and additional fiscal stimulus from the Biden Administration. The 10-year Treasury yield ended the week at 1.05%, it’s highest yield since mid-February ’20.
Muni bonds could get a nice lift from demand thanks to potentially higher tax rates and fiscal stimulus designed to shore up state balance sheets like the State of Illinois. Both the City of Chicago and the State of Illinois sport BBB credit ratings.