This week there are three points that will drive the market. The Stimulus – Nancy Pelosi gave the Trump Administration until Tuesday to bring her a deal. The election – Trump v. Biden. Flip a coin, it is a toss up. Covid-19 – is the world heading for another lockdown or will it just let the virus do its thing. All of this will make the market a bit volatile.
Covid-19 cases are again increasing across the globe. It looks like leaders are taking a more targeted approach to reduce the economic and societal impacts. If this continues, the Covid-19 cases should not materially impact the market. Be mindful of news that indicate a total lockdown.
%1.5 – $1.8T, trillion, yes that is with a T. it is back and forth every day. Each side not budging. This battle is made for the mainstream media. If the markets continue to expect a stimulus by the end of the year, the market could make a new high by Dec 31, 2020.
Election – A Biden win is what the polls show. However, a Democratic blue wave in the senate is to tight to determine. Depending on that outcome, this election could have substantial implications on the market in near term. This is a blind spot that should be hedged. Hear me out, if there is a Biden win and the Senate remains firmly in Republican hands, the $5T stimulus over the next year will vaporize, and the bickering will continue. This could bring the market down 5% – 10%. This market today is propped up by this stimulus expectations, not Fundamentals.
This market remains strong longer term. But there might be some buying opportunities ahead.
Happy Monday. Good Luck out there this week.
Global Spotlight
Protests in Nigeria. The unrest that began nearly two weeks ago will continue in the coming week.
A showdown between the United States and the other permanent members of the U.N. Security Council over the Iran arms embargo. The issue will come to a head Oct. 18 when the embargo expires under the terms of the original Joint Comprehensive Plan of Action.
More Brexit talks. The risk of a no-deal British exit from the EU single market remains high after London demanded Brussels make a “fundamental” change of approach to the ongoing trade negotiations or else the United Kingdom would abort the process.
Chinese economic data. Beijing will release 2020-Q3 gross domestic product data and monthly reports for September on industrial production, private investment and retail sales on Oct. 19.
Japanese Prime Minister Yoshihide Suga’s first overseas trip. Suga will travel to Vietnam and Indonesia from Oct. 18-21; his inaugural visit will focus on defense ties, and reportedly will include the signing of a deal with Vietnam to allow the sale of Japanese arms to the country.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Weeks Numbers
Review Last weeks numbers here. The S&P 500 ended the week up just 19 basis points from last Friday and is up 7.83% YTD. The index is 2.7% below its record close.
Earnings
Source I/B/E/S data from Refinitiv
Aggregate Estimates and Revisions
- 20Q3 earnings are expected to be -18.7% from 19Q3. Excluding the energy sector, the earnings growth estimate is -14.5%.
- Of the 49 companies in the S&P 500 that have reported earnings to date for 20Q3, 85.7% have reported earnings above analyst expectations. This compares to a long-term average of 65% and prior four quarter average of 73%.
- 20Q3 revenue is expected to be -3.9% from 19Q3. Excluding the energy sector, the growth estimate is -1.0%.
- During the week of October 19, 91 S&P 500 companies are expected to report quarterly earnings.
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