This Tuesday was National Scrabble Day! The timeless board game that is sold in more than 120 countries in nearly 30 languages revolves around forming words from a pre-determined pool of lettered tiles. As the game relates to our equity market outlook, the only word on our mind this week is earnings, since we have touted that earnings, rather than multiple expansion, would be critical in helping the S&P 500 score points this year. We’re hopeful the 1Q21 earnings season will be the first step toward achieving our 2021 earnings estimate of $190, which is not only above the consensus estimate of $175, but would also translate to the best year of earnings growth since 2010. At a minimum, strong earnings will be needed to support the second best start to a year (S&P 500: +11.5% YTD) since 1998. However, a more optimistic tone around earnings may serve as a bonus and upside to our base case, therefore we’ll spell out our expectations and dynamics to watch throughout earnings season.
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