The increase in profit of the company, which is the main factor in the creation of stock prices, will be significantly reduced due to the epidemic this year.
Goldman Sachs Investment Bank has announced that the S&P 500 will have a 33% decline in earnings per share in 2020. Also, low-energy energy, consumer and industrial companies will put pressure on the index. According to analysts, the profit margin at the beginning of the year was at a record high, falling to 8.7%, the lowest level since 2010.
The biggest hit on income will be in the second quarter, when mass unemployment, trade-offs and quarantine activity will reduce demand to an unprecedented level. During the three-month period, the S&P 500 expects a loss of $ 10 per share, which will be 123% lower than the same period last year.
According to the bank, consumer goods, healthcare and utilities can harbor investors. Analysts say the technology industry will also face the most of the economic storm, “given a high share of recurring revenue for some of the largest companies.”
The economy must stabilize before profit can increase. According to the bank, there will be no recovery till the third quarter with a 19% increase in GDP. Analysts say revenue growth will increase by 27% in the fourth quarter.
Development will continue next year as well, but such preliminary estimates are still “unusually complex,” given the unprecedented social disadvantage caused by COVID-19.
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Recall, the number of Americans applying for unemployment benefits doubled for the first time – from 3.28 million to 6.64 million. Despite this jump, US stock indices reacted with an increase during trading on 2 April.
Therefore, as of 11:00 am in the United States, the Dow Jones Industrial Index rose 1.6%, up more than 300 points, 1.8% in the S&P 500, and 1.3% in the Nasdaq Composite. At the same time, on Tuesday, the Dow Jones and the S&P 500 closed with the worst indicators for the first quarter.
Read: The Ukrainian stock market is being adapted to EU standards.
By content: Businessinsider