In the United States, the strong economic recovery from the first coronavirus wave helped U.S. firms perform better financially than anticipated in the third quarter, while earnings and revenues were lower relative to the same time in 2019.
About two-thirds of the S&P 500 firmshave already released their third quarter accounts, with about 9 out of 10 cases being a good surprise compared to the predictions of analysts. As of 30 October, 64% of the members of the S&P 500 had already reported their results and, in 86% of cases, profits exceeded consensus estimates, particularly in the areas of communications services and discretionary consumer goods. Sales beating the consensus of analysts have also been reported by 81 percent of firms, and sales for the S&P 500 are now forecast to decline by 2.1 percent year-on-yearcompared to -3.6 percent expected at the end of September.
According to a FactSet note released on Friday, profits in the S&P 500 as a whole are now predicted to decline by 9.8 percent year-on-year, a noticeable improvement over the estimated decrease of -21.1 percent made at the end of September. However, profit growth is not expected to return until the first quarter of 2021, which is expected to increase by 14.5 percent, following a further 11.2 percent fall expected in the fourth quarter of 2020.
U.S. stocks remain expensive on the valuation side, with a PER (price earnings ratio) of 20.6 over the next 12 months, well above the 5- and 10-year averages of 14 to 16 times over the past 12 months.
Last week, in the third quarter, large-scale technology and internet stocks, the GAFA, posted broadly higher-than-expected results, driven by a strong recovery in online ads and the continued growth of e-commerce under the impact of the coronavirus pandemic, which has shifted customer and business preferences with massive changes. However, after these announcements, the stock prices of ‘technos’ dropped as investors worried about their prospects, opting to take profits from stocks that have risen sharply since the beginning of 2020.