Q2 earnings are ramping up; economically sensitive sectors should perform well with less upside for tech
As earnings for the second quarter start to roll in, this week marks one of the densest reporting periods. According to research from Bank of America, earnings have come in 17% above expectations so far and the trend is likely to continue. Q2 in 2020 represented the trough for many companies’ performance during the pandemic, meaning that growth should look very good in comparison. We believe that economically sensitive sectors like industrials and oil & gas should see strong growth and sectors tied to consumer spending and the reopening should also see firm numbers. However, the same cannot be said for the technology sector which had a blowout year in 2020. We expect the tech sector to show more muted growth and earnings beats compared to others, though there is still upside potential as evidenced by Intel’s strong earnings last week. Overall, we expect earnings to surprise to the upside across the board for the names in our approved universe as the economy continues to grow and business conditions return to normal.