In depth 

How to ride the earnings recovery

How to ride the earnings recovery

The V-shaped equity recovery indicates that the market mostly sees a return to normal programming within a year or so. But most companies will be entering 2021 in a very different situation to how they came into 2020. Debt is higher across the board in relation to cash profits, most industries are still constrained in some way by Covid-19 measures, and looking at the FTSE 100, capital expenditure is set to climb in 2021 after plunging this year, while sales will take longer to recover. These factors, plus possible changes to wage expectations, taxes and further rolling lockdowns mean even the lowered earnings estimates for next year and 2021 could be overly optimistic. 

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