Starting from the second quarter in the US, corporate earnings forecasts have substantially exceeded expectations, boosting market participants' earnings forecasts for the whole year in 2021. The profitability of companies in mature markets is expected to climb the wall of worry. At the same time, vaccination will push economic activities back to normal. Therefore, it is expected that earnings in the second half of the year will exceed expectations.
The European and American governments will maintain an easing policy attitude for a longer period of time, which increases investors' confidence in the market prospects. The State Council of China also called for easing policies and reinvigorating infrastructure investment, which indicates there will be more easing policies in the future.
The People's Bank of China announced a reduction in the deposit reserve ratio. This measure will support economic growth, considering that in the previous rounds of easing cycles, the central bank's RRR cut has never been done only once. Although monetary easing will not immediately reverse the economic slowdown, this move does highlight that policymakers are shifting their top priority from curbing "excessive" credit to stable growth. This is expected to boost investor confidence and improve market liquidity.
Source:
Standard Chartered - Financial Market Weekly Update (2021-7-23)
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