In today\u2019s Steady Investor,\nwe look at key factors that we believe are currently impacting the market and\nwhat could be next for the markets such as:<\/p>\n\n\n\n
US GDP Declines -4.8%\nin Q1<\/strong>, Market Rallies<\/strong> \u2013 On Wednesday,\nthe Bureau of Economic Analysis (BEA) reported that the US economy shrank at an\nannual -4.8% pace in Q1, marking the sharpest rate of decline since 2008. This\nis the BEA\u2019s first Q1 GDP estimate (there are usually four), so we might\nreasonably expect that the final numbers for Q1 are slightly better or worse\nthan -4.8%. Even still, the S&P 500 rallied +2.66% on the same day, which the\nfinancial media mainly attributed to a promising Covid-19 treatment being developed\nby Gilead Sciences. For those perplexed by how the stock market could rally\nover +2% on a day when GDP figures were so dismal, you need only remember that\nthe stock market does not move on backward-looking\n<\/em>data. We would argue that when the S&P 500 plummeted -34% from February\nhighs, the equity markets were pricing-in the bruising GDP figures we\u2019re only\nlearning today. The stock market is forward-looking,\nnot backward-looking<\/em>. As for the hit to economic growth in the US, the contraction\nwas largely expected, and we should also expect further declines in Q2. Personal\nconsumption of services contributed to 47% of GDP in 2019, and with the\nservices segment of the economy virtually shut down with social-distancing, it\nfollows that services consumption fell -10.2% annualized in Q1. 1<\/sup> It\nis likely to fall further in Q2, but that may not matter for the stock market,\nwhich appears to be pricing-in the recovery that could hit in Q3 and Q4.<\/p>\n\n\n\n ________________________________________________________________________<\/p>\n\n\n\n How Can You Navigate the Current Market?<\/a><\/strong><\/p>\n\n\n\n With declining GDP and a recession fueled by social\ndistancing, the current market has many investors concerned for their financial\nfuture. But there are some silver linings in the midst of this crisis that are\nimportant for investors to keep in mind. <\/p>\n\n\n\n In our just-released Market Strategy report, we look at what\nthe new normal means for the economy and what silver linings could positively\nimpact the economy in the future. <\/p>\n\n\n\n If you have $500,000 or more to invest and want to learn\nmore about these insights, click on the link below to get your free report\ntoday! <\/p>\n\n\n\n IT’S FREE. Download the Just-Released May 2020 Market Strategy Report<\/a>2<\/a><\/sup><\/strong><\/p>\n\n\n\n ________________________________________________________________________<\/p>\n\n\n\n The US Consumer\nAppears Ready to \u2018Get Back Out There\u2019 \u2013 <\/strong>A closely watched gauge of US\nconsumer confidence reported what everyone already knew: consumer confidence plummeted\nin April. It was a month beset by social-distancing, stay-at-home orders, and\njob losses, with US consumers often limiting purchases to essential goods. But\nthere was a silver lining in the data suggesting that US consumers might not be\nas down-and-out as many believe, given a measure of consumer expectations <\/em>for the next six months\nimproved. What\u2019s more, the absolute level of the Conference Board Consumer\nConfidence sentiment index posted a reading that is barely below its 20-year\nmoving average, suggesting that this pandemic may have ultimately just pulled consumers\n\u2018back to earth.\u20193<\/sup><\/p>\n\n\n\n The Fed to Intervene\nMore in Muni Markets \u2013 <\/strong>The Federal Reserve is extending its liquidity to\nstate and local governments, expanding a program to purchase municipal debt\nwith maturities of up to three years. Many states have been burdened with\nunemployment benefits and rising health care costs, putting pressure on yields\nin many muni markets. The Fed\u2019s actions may help neutralize this pressure, by\ncommitting $500 billion to the lending facility with the US Treasury kicking in\n$35 billion to cover losses.4<\/sup> <\/p>\n\n\n\n US Corporate Earnings\nRoundup<\/strong> \u2013 Corporate earnings are starting to trickle in. While many\ncompanies are reporting shrinking profits or losses, the issue is less about\nwhat happened in the January-through-March period and more about evolving\nexpectations for the current and coming quarters, which continue to be set\nlower as a result of the pandemic. For the\n193 S&P 500 members that have reported Q1 results, total earnings or\naggregate net income is down -17.1% on +0.6% higher revenues, with 64.8%\nbeating EPS estimates and 60.6% beating revenue estimates. For the tech sector, we now have Q1 results from\n35.3% of the sector\u2019s market capitalization in the S&P 500 index. Total Q1\nearnings for these Tech companies are down <\/p>\n\n\n\n -1.6% from the same period last year on +2.7% higher\nrevenues, with 74.1% beating EPS estimates and 70.4% beating revenue estimates\n\u2013 not so bad. Another positive area is Consumer Staples, where total Q1\nearnings to-date are up +8.4% on +4.7% higher revenues, with 75.0% beating EPS\nestimates and 50% beating revenue estimates. On the downside, the financial\nsector posted higher than expected credit costs, which have weighed heavily on profitability,\ndragging down the overall Q1 earnings growth pace for the S&P 500\nindex. For the Finance sector, we now have Q1 results from 57.0% of the\nsector\u2019s total market capitalization in the S&P 500 index. Total earnings for\nthese financial companies are down -44.6% from the same period last year on\n+1.6% higher revenues, with only 46.8% of the sector companies beating EPS\nestimates and 63.8% beating revenue estimates. Excluding\nthe Finance sector drag, Q1 earnings growth for the remaining S&P 500\ncompanies that have reported results would be down -4.4% (vs. -17.1% including\nthe reported Finance results). For Q1 as a whole, total\nS&P 500 earnings or aggregate net income is now expected to decline -15.5%\nfrom the same period last year on +1.5% higher revenues. Excluding the Finance\nsector drag, Q1 earnings for the rest of the index would be down -11.4%.5<\/sup><\/p>\n\n\n\n What to Make of Unprecedented Times? <\/strong>Investors and\nbusinesses are navigating unprecedented times. As we wait for the virus to pass\nand the economy to recover, many investors may be wondering what they can do\nnow as we wait. In the meantime, I recommend that investors remain calm, focus\non the long term and not let emotions take control of their investments. To\nhelp you focus on the fundamentals instead of the fearsome headlines, I am\noffering all readers our Just-Released May 2020 Market Strategy Report.6<\/sup><\/p>\n\n\n\n In this report, we examine ten trends that are forming in\nthe \u201csocially-distanced\u201d economy, which provides context for the unique set of\nchallenges that corporations across the world are facing. We also take a look\nat some of the silver linings in this crisis, which are often underappreciated\nin a sea of bad news and weak data.<\/p>\n\n\n\n If you have $500,000 or more to invest and want to learn\nmore about these insights, click on the link below to get your free report\ntoday! <\/p>\n","protected":false},"excerpt":{"rendered":" First look at Q1 earnings, consumers ready for re-opening, market looks to Q3\/Q4 recovery<\/p>\n","protected":false},"author":3,"featured_media":7426,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71,73],"tags":[],"class_list":["post-8625","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-private-client-group","category-steady-investors-week"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8625","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=8625"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8625\/revisions"}],"predecessor-version":[{"id":10610,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8625\/revisions\/10610"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=8625"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=8625"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=8625"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}