MARKET COMMENTARY

Weekly Market Commentary

October 12, 2020

 

The Markets

 

Markets were sharply focused on the status of stimulus last week. First, it was on. Then, it was off. Then, it might be on. Then, it was off again. There was a big bill. There was a smaller bill. There were stand-alone options.

 

•Maybe• was enough for investors

Major U.S. stock indices finished the week higher, per Barron•s, and global indices were bullish on Friday because of U.S. stimulus talks, reported Financial Times.

 

•Markets are dizzy from all the talk on both sides about what they want from a deal but believe that something will inevitably happen anyway•Markets are essentially drunk on massive government spending just as they are inebriated from all the Fed quantitative easing and zero-interest rate policy,• said an advisory group chief investment officer cited by Financial Times.

 

Earnings season is upon us

Another factor that influences investors is earnings season, which begins this week. During earnings season, companies communicate how profitable they were during the previous quarter.

 

Third-quarter earnings estimates for companies in the Standard & Poor•s 500 Index remain subdued. John Butters of FactSet reported, •For Q3 2020, the estimated earnings decline for the S& P 500 is -20.5 percent.•

 

While that is a significant decline, it is an improvement on -25.3 percent, which was the June 2020 estimate for third quarter earnings. It is also an improvement on second quarter•s -31.9 percent.

 

Some companies haven•t provided guidance

It•s notable one of four companies in the S&P 500 did not provide earnings per share (EPS) guidance for 2020 or 2021. (Guidance is a forward-looking statement that tells investors what the company expects will happen in the near future.) •Almost all of these companies cited the uncertainty of the future economic impacts of COVID-19 as the reason for not providing or withdrawing EPS guidance for the full year,• reported FactSet.

 

Certainty about earnings may improve when a treatment or vaccine for the virus becomes available. The Milken Institute reported there are 318 treatments for COVID-19 and 213 vaccines in the works. Thirty-five of the vaccines are in clinical trials.

 


Data as of 10/9/20

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

3.8%

7.6%

19.1%

11.0%

11.5%

11.6%

Dow Jones Global ex-U.S.

3.3

-3.4

6.6

-0.1

3.2

1.8

10-year Treasury Note (Yield Only)

0.8

NA

1.6

2.4

2.1

2.4

Gold (per ounce)

1.1

26.3

27.6

14.6

10.8

3.6

Bloomberg Commodity Index

4.9

-9.4

-6.0

-4.5

-4.3

-6.6