Could earnings season and the fresh round of lockdowns present a reality check for this rally.
Howitt argues that while share prices have surged in the past 18 months as investors bid up COVID-19 winners and stocks that would do well when conditions normalised, the August reporting season should bring a slate of profit reports that justify the rally â€“ in other words, the â€œEâ€ will catch up to the â€œPâ€.
Katie Hudson, head of Australian equities research at Yarra Capital Management, says most investors will be prepared to look through the latest round of lockdowns with an eye to the resilience in the Australian economy and what theyâ€™re seeing in the Northern Hemisphere, where reopened economies are growing strongly.
Her main focus for earnings is to try to figure out the extent to which peak earnings might have passed for some sectors.
Earnings guidance and outlook statements will be key to determining whether peak earnings have passed, and will be closely watched.
But thereâ€™s broad agreement the latest lockdowns will make management teams cautious about being too definitive about the year ahead, meaning investors will need to rely on other clues about confidence and profitability.
Brendan Oâ€™Dea, managing director of listed investment company giant Milton, says while lockdowns will weigh on the local economy, investors shouldnâ€™t lose sight of the fact a global economic recovery remains in its early stages, propelled by record levels of fiscal and monetary support.
This goes directly to a second major focus for investors in profit season: inflationary pressures on profit margins.
Finally, Radzyminski says investors should be alert to signs of economic fragility revealed by the latest lockdowns.
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