As we start the week with few economic indicators to show where the economy is going, many will be asking where the evidence is to support such lofty valuations of companies, especially in the Tech Sector. Those that are counting on QE to help the market go further will be greatly disappointed. Tim Duy said it best with this bottom line:
“The Fed is committed to zero-rates for the foreseeable future. They are not committed in the same way to the pace of asset purchases. The Fed though is not inclined to shift its current stance very easily. The bar is high for a rate hike. I suspect it is not nearly so high for the Fed to pull back on asset purchases. In the near term, that isn’t going to happen because the Fed is wedded to the bearish risks for the economy. If the forecast changes, the Fed will change with it. But they may be slow to change, and then change abruptly.”
Three things to look as the week gets started.
The economic data and the indicators that point to how the economy is doing. Do not focus media representation, look at the facts. Do not count on the FED much longer. The QE and the lower interest rates are losing its power over the market.
The virus driving the market, with any positive news, the market reacts. Look at the probabilities oof if a successful vaccine can be created, produced, distributed, and if people are going to use it. These items will drive the market until the virus can be controlled. I have been thinking this might not be the last time we have to deal with a virus. However, the amplitude of the reaction by the media this time put the world at far more risk than just the virus.
We have hit a stall from the reopening and our political leaders are unready to act. This fact, while probably good for moving past this crisis, will cause a bit more pain.
Ruth B. Ginsburg died last Friday night. I am focused on the possible paths our political leaders will do and how that will affect investors in the market.
Happy Monday. Good Luck out there this week.
Global Spotlight
The United States plans to issue an executive order to strengthen its claims that U.N. sanctions are snapping back on Iran. In August the U.S. triggered the snapback sanctions mechanism — which the rest of the permanent members of the U.N. Security Council said was not legitimate — and in the eyes of the United States, the snapback goes into force Sept. 20
The European Union will discuss sanctions on Belarus and Turkey. The leaders of the EU member states will meet Sept. 24-25 with two controversial foreign policy issues on the agenda: Belarus and Turkey.
Hong Kong’s pro-democracy camp will hold a poll on potentially boycotting the legislative term. The Hong Kong Public Opinion Research Institute on Sept. 21 will hold a weeklong poll asking 2,000 respondents to give their opinion on the issue.
Justin Trudeau and the Liberal Party test their support in the Canadian prime minister’s Throne Speech. When parliament opens on Sept. 23, Trudeau hopes that his Throne Speech will have the backing of the Greens and the New Democratic Party so his fragile minority government does not lose support such that new elections occur later this year.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
After last week’s quadruple witching hour with options expiring and a FED announcement, this week should have fewer surprises in economic news.
Briefing.com
Last Weeks Numbers
Review Last weeks numbers here.
A drift higher is what the market saw ahead of the fed announcement and presser on Wednesday. With interest rates going to be surprised lower for longer, the market might be seeing that the economy is not as bullish as priced in.
Earnings
Source I/B/E/S data from Refinitiv
Aggregate Estimates and Revisions
- 20Q2 earnings are expected to be -30.2% from 19Q2. Excluding the energy sector, the earnings growth estimate is -23.5%.
- Of the 499 companies in the S&P 500 that have reported earnings to date for 20Q2, 82.6% have reported earnings above analyst expectations. This compares to a long-term average of 65% and prior four quarter average of 71%.
- 20Q2 revenue is expected to be -8.7% from 19Q2. Excluding the energy sector, the growth estimate is -4.0%.
- During the week of September 21, nine S&P 500 companies are expected to report quarterly earnings.
Noteworthy
One article that I found particularly interesting was from the Visual Capitalist where they provided information on how global CEOs see the shape of the recovery. It is worth the read.
