In today’s Steady Investor, we look at key questions investors are asking, and factors that we believe are currently impacting the market such as:
A Reasonably Good Start to Q3 Earnings Season – Q3 earnings season kicked off this week, with banks leading the charge. Improved credit quality and continued capital markets momentum helped reporting banks deliver much improved results, at least relative to the first half of the year. For the 36 S&P 500 members that have reported Q3 results already, total earnings are down 14.1% from the same period last year on 1% lower revenues, with 88.9% beating EPS estimates and 75% beating revenue estimates. This is a notably better performance than what we saw from the same group of 36 companies in the first half of 2020, which is a good sign that the economic recovery is taking hold. For the Finance sector, we now have Q3 results from 29% of the sector’s market capitalization in the S&P 500 index. Total earnings for these Finance companies are down 11% on 0.7% lower revenues, with 90% beating EPS estimates and 80% beating revenue estimates.1
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How to Use Market Volatility to Your Advantage
As we wait for a vaccine and for the market to fully recover, many investors will have to brace themselves for continued volatility. Market volatility is challenging for just about every investor, especially with all the unknowns that come with the current pandemic. But for all the worry and discomfort volatility often causes, did you know there are also several positive aspects of volatility?
If you have $500,000 or more to invest, get our free guide, “Using Market Volatility to Your Advantage” and learn our insights, based on decades of experience, about how a volatile market may be able to actually help investors refine their strategies and potentially generate solid returns over time.
You’ll get our ideas on:
Download Our Guide, “Using Market Volatility to Your Advantage”2
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Major Retailers Take Aim at Amazon, Look to Extend Shopping Season – For all the eager holiday shoppers out there, you’re probably aware that Amazon’s Prime Day took place this week. But the Black Friday-like shopping event was not just limited to Amazon. Major retailers like Target, Walmart, and even Best Buy launched their own sales events this week to compete with Amazon’s, but also in an effort to spread-out the holiday shopping season for as long as possible. There is not really a scenario where stores can be crowded this November, and so retailers are trying to accomplish two things with an extended holiday shopping season: ease the strain on e-commerce supply chains, and lock-in sales knowing that November is going to be an economically, politically, and even socially uncertain time. Walmart and Target already announced that stores will be closed on Thanksgiving, and the fact that customers will not be able to visit stores en masse already places a damper on retail sales in Q4.3 As consumer spending makes up a large percentage of the total U.S. economy, the holiday shopping season will be closely watched.
Global GDP Growth in 2020 May Be Better-Than-Expected – In our view, the tendency to over-estimate the depth of the recession was one of the reasons the stock market has been so resilient in 2020. In the case of global GDP growth, the International Monetary Fund estimated in June that the global economy would decline by -5.2% in 2020. With more information and a little more time, however, the estimate continues to improve. The IMF is now saying the world’s GDP should decline by -4.4% this year, thanks to massive fiscal and monetary stimulus. Governments around the world have committed $11.7 trillion or 12% of total global output to the recovery, much of which has yet to work its way through the capital markets, in our view. The IMF’s improved forecast also comes as China has seen a swift recovery, and is expected to notch full-year growth for 2020.4 Harder hit economies, like Europe and Latin America, are going to take longer to reach pre-pandemic levels. And the United States may get there faster than many currently believe.
Checking-In on Inflation – Consumer prices in the United States rose in September for the fourth straight month, though overall gains in inflation remain low. Interestingly, used car purchases posted their biggest monthly increase since 1969, as Americans ditched air travel in favor of road trips and remote work from new or temporary homes. Prices elsewhere have ticked only slightly higher as supply and demand dynamics remain fuzzy during the pandemic. In related news, the Social Security Administration announced this week that seniors receiving the monthly benefit can expect a 1.3% increase next year, for the 2021 cost-of-living adjustment. For many, this would translate to about a $20 increase to the monthly benefit.5
Finding
Silver Linings amid the Pandemic – It may be hard to find the silver linings in the midst of
the current crisis, but that doesn’t mean they aren’t there. To help give you
additional insight into how you can make the most of turbulent times, I
recommend reading our guide “Using Market Volatility to Your Advantage.”6 This
guide can help you learn about our insights, based on decades of experience,
about how a volatile market may be able to actually help investors refine their
strategies and potentially generate solid returns over time.
You’ll get our ideas on:
If you have $500,000 or more to invest, download this free guide today by clicking on the link below.
Disclosure