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Optimistic about US growth, we have added US financials

Asia Analytica
Asia Analytica10/21/2021 11:57 AM GMT+08  • 6 min read
Optimistic about US growth, we have added US financials
US consumers and businesses are, by and large, flush with cash, coming out of the Covid-19 pandemic.
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There are quite a few positive takeaways from the latest string of earnings results released by the biggest banks in the US, which officially kicks off the current reporting season. As we know, banks tend to be close proxies for the broader economy. And their robust results and upbeat outlook underscore confidence in both consumers and businesses — and should alleviate some of the worst fears of an economy that is stagnating even as inflationary pressures grow. US stocks rebounded from the recent selloff, partly bolstered by the strength of these earnings results.

US consumers and businesses are, by and large, flush with cash, coming out of the Covid-19 pandemic that saw record government stimulus-relief spending. We have written previously about how governments around the world, and especially in developed economies, have effectively socialised private debts.

A case in point: The release of loan loss reserves was a major factor behind the strong bank earnings. These are the reversals of provisions made last year, in anticipation of higher default rates when the crisis hit — but not ultimately needed. Unlike in the aftermath of the global financial crisis, the average American household emerged from the pandemic with its balance sheet intact, if not stronger.

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