Weekly Buzz: Banking on earnings season 🏦

5 minute read

The curtain’s rising on another earnings season, and this time the spotlight’s on the heavyweight banks of the financial sector – think Citigroup, Goldman Sachs, and Morgan Stanley. Here's what you need to know as the numbers start rolling in.

What to expect this season

Investors have lofty expectations for this earnings season: S&P 500 companies are projected to post their fastest profit growth since late 2021, an 11.9% increase compared to the same period last year. And after a standout year for financial stocks in 2024 – where they beat the S&P 500’s overall return – investors are now betting on another earnings leap for the sector.

That's because banks are uniquely positioned to benefit in today's high-rate environment. Their net interest margins – the spread between what they earn on loans and what they pay on deposits – are widest when rates are elevated. And that environment might be sticking around; traders are now betting that the next US rate cut will happen in September, instead of June.

See, with inflation cooler and the job market proving strong, the US Federal Reserve (Fed) is less likely to lower interest rates again anytime soon. The US added 256,000 new jobs in the final month of last year – blowing past the 160,000 that economists were predicting – and marking the 48th consecutive month of job growth for American workers.

What’s the takeaway here?

Signs point to a US economy that’s heating up, and that bodes well for continued earnings growth. But that same strength suggests interest rates could stay higher for longer. As earnings season unfolds, expect some volatility as markets digest the results. Look beyond the short-term headlines – it’s often better to simply stay invested with a diversified portfolio that’s always working towards your financial goals (and yes, our General Investing portfolios come to mind here).

📰 In Other News: China’s export machine roared back to life

China's export data for December defied expectations, with growth hitting 10.7% year-over-year – a stark contrast to November's slowdown. This late-year burst helped propel China's annual trade surplus to its highest level in history, nearly US$1 trillion.

What drove the recovery? For one, demand from its key trading partners rebounded, and Chinese goods have become even more competitive on the global stage, with export prices falling 14.5% over the year. There may also be a strategic element: the looming spectre of potential new tariffs under the incoming Trump administration may have rushed Chinese manufacturers to ship their goods.

While China will have to navigate trade tensions to maintain its momentum, one thing remains clear: it’s showing no signs of relinquishing its crown as the world's manufacturing superpower anytime soon. If you’re interested in tapping into China's ongoing economic story, our Flexible Portfolios offer a straightforward, customisable way to do so.

📖 A Little Context: Earnings season

The US Securities Exchange Act of 1934 made it mandatory for American public companies to disclose their financial information – a revolutionary concept at the time. Today, thousands of public companies report their earnings each quarter, creating one of the most watched and analyzed events in the financial world. While different regions follow their own calendars – European firms often report semi-annually, for instance – the US earnings season typically sets the tone for global markets.

🗓️ Save the Date

What’s FAT got to do with 2025?

2024 was a groundbreaking year for major asset classes like equities, gold, and cryptocurrencies, with multiple all-time highs achieved throughout the year. But now, it’s time to look ahead.

Join Stephanie and Michele on 21 January for 2025 Macro Outlook: "FAT" is the new normal. Discover how Fiscal expansion, AI, and Trump’s agenda could shape your investments in 2025.

Get the insights you need to stay ahead—and don’t forget the live Q&A with our experts.

✨ Featured in App

Is your SRS just sitting there?

Your SRS deserves better than 0.05% p.a. in a bank account. Give it the glow-up it needs with Simple Plus. Now, for a limited time only, apply voucher SRSPLUS and boost your returns by 0.2% p.a. until 31 December 2025.

All you have to do is apply the voucher and deposit any amount by 31 December 2024.

Disclaimer:

Disclaimer:

*The latest annualised yield is as of 11 October 2024 and may change depending on market conditions. Yield to maturity is not a guarantee for future returns. The 0.2% p.a. fee rebate will apply until 31 December 2025. For more information, visit www.stashaway.sg/srs-simple-plus. Please refer to the full terms and conditions on www.stashaway.com/legal.