The S&P 500 is not the only index to be gaining month after month. In Europe, the Stoxx 600 continues to hit new highs after seven consecutive monthly gains, its longest winning streak since 2013.
Some analysts think the move has gone too far. Bank of America predicts European equities will end the year some 12 per cent below current levels, saying economic growth and corporate earnings will likely slow down after spiking from their 2020 lows.
Maybe, but bulls can argue 2021’s consistent gains are justified by Europe’s stellar earnings recovery. In the current earnings quarter, 64 per cent of companies that have reported so far have topped analyst estimates – the highest beat rate in five years and comfortably above that seen in a typical quarter, when 51 per cent beat and 40 per cent miss estimates.
Refinitiv data shows 71 per cent have exceeded revenue estimates, compared to a 56:44 beat/miss rate in a typical quarter.
Better still, companies are really crushing expectations; earnings are 23.6 per cent above estimates, way above their long-term average surprise factor of 5.3 per cent.
Stocks are also more expensive than usual – they trade on 16.4 times estimated earnings, above their 10-year average of 14 – but bulls will hope companies continue to justify investor optimism.
