At the end of April, American stock indices showed once again confident growth: Dow Jones Index added 2.7%, SP500 increased by 5.3%, Nasdaq also grew by 5.4%.
Economic incentive packages
The entire month the American market was impressed by the immediately announced in March two economic aid packages… Recall that on March 11, 2020, the United States adopted the third stimulus package worth $ 1.9 trillion. Following on March 31, Joe Biden presented an 8-year infrastructure development plan for $ 2.25 trillion.
Such active government assistance to both individual households and sectors pushed the American indices to new highs. Thanks to these measures, an accelerated recovery of the US economy is expected in 2021/22. Moreover, according to forecasts of representatives of the Fed, the growth of US GDP as a result of recovery from the pandemic in 2021 could exceed 7% for the first time since 1984.
Positive reporting season
The second topic of the month was the reporting season for the first quarter. Over the last two weeks of April, many major corporations, such as Tesla, Amazon, eBay, Alphabet, Apple, Facebook, Microsoft, Exxon Mobil, Chevron, Boeing, General Electric, Caterpillar, Visa, Starbucks, Coca-Cola, IBM, managed to publish financial statements. , Johnson & Johnson, Schlumberger, Netflix, Intel, AT&T, Verizon, Procter & Gamble, American Express, Lockheed Martin, Abbott Laboratories, Freeport-McMoRan and many more.
In May, major corporations are expected to continue publishing landmark reports, including ViacomCBS, Alibaba, Walt Disney, Airbnb, Applied Materials, Coinbase, Walmart, Home Depot, Baidu, Cisco Systems, JD.com. At the moment, slightly more than half of the SP500 companies have reported their financial results, and in 86% of cases the results were better than expected… If the upward trend in corporate profits is supported by other companies, the average revenue growth may become the fastest in the last ten years.
Investors in May will continue to assess the effect of Biden’s $ 1.8 trillion plan to support American families announced on April 28. The money is planned to be allocated, among other things, to increase the availability of education and vacation for workers, paid in the amount of up to $ 4000 per month.
On the other hand, the markets are sensitive to any information about ways to finance similar aid packages and react with sales. Earlier, the US President has already announced an increase from 21% to 28% of the corporate tax rate and an increase in income tax on individuals earning over $ 400 thousand per year. It also became known that for people earning more than $ 1 million a year, the maximum rate on capital gains and dividends will increase – from 20% to 39.6%.
Market participants also fear that after the steady growth of American indices since the beginning of the year, the stock market is overbought and may enter a correction phase. Moreover, from the point of view of historical dynamics, May demonstrates one of the weakest results of the year.