{"id":8904,"date":"2020-10-12T16:29:35","date_gmt":"2020-10-12T16:29:35","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=8904"},"modified":"2022-02-26T13:06:29","modified_gmt":"2022-02-26T13:06:29","slug":"zacks-q3-review-and-forecast-for-q4-and-beyond","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/zacks-q3-review-and-forecast-for-q4-and-beyond\/","title":{"rendered":"Zacks Q3 Review and Forecast for Q4 and Beyond"},"content":{"rendered":"\n<p>Few things about 2020 have felt normal, and the November\nelection is not likely to offer much relief. But as we have learned time and\nagain throughout history \u2013 and in particular this year \u2013 stocks love to climb a\nwall of worry. Even though U.S. stocks posted their weakest September in almost\n10 years, the S&amp;P 500 index still managed to finish the third quarter up\n+8.5%. Together with Q2, the S&amp;P 500 has risen by almost +30% in six\nmonths, delivering its best two-quarter performance since 2009. Defying just\nabout everyone\u2019s expectations, U.S. stocks are positive in 2020.<sup>1<\/sup> <\/p>\n\n\n\n<p>One of the biggest economic stories of the quarter came from\nthe housing sector. In the month of July, housing sales soared 23% from June,\nhitting an annual pace of close to 1.5 million. Sales of new single-family\nhomes jumped 14% month-over-month in July, hitting an annual pace of 901,000. For\nthe first time ever, the median price of an American home is greater than\n$300,000.<sup>2<\/sup> The strength we\u2019re seeing in the housing market today is\nroughly equal to what we saw 2005, when the housing market peaked.<\/p>\n\n\n\n<p>Downstream effects of the housing boom have been evident in\nconsumer spending on furniture, appliances, and home improvement, which has\noutperformed spending across most other sectors. Construction employment has recovered\nbriskly. One familiar name in the space, Home Depot, offers anecdotal evidence\nof the sector\u2019s strength: the company posted its best quarterly (Q2) sales\ngrowth in nearly 20 years.<\/p>\n\n\n\n<p>______________________________________________________________________________<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2020_10_12&amp;content=stock_market_outlook_report\">Make the Most of Your Long-term Returns<\/a> <\/strong><\/p>\n\n\n\n<p>Uncertainty politically, economically and socially seems to\nbe the only constant, and with it comes many fears and unknowns. To help you\nnavigate this turbulent time, we are offering an exclusive look into our\njust-released <strong>October Stock Market Outlook Report. <\/strong><\/p>\n\n\n\n<p>This report will help you make decisions based on data and\nfundamentals instead of fears and media hysteria. This report contains some of\nour key forecasts to consider such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Should you be worried about the 2020 Presidential Election?<\/em><\/li><li><em>What stocks could go up when vaccine distribution rolls out?<\/em><\/li><li><em>Signs of recovery in certain sectors<\/em><\/li><li><em>What of U.S. GDP Growth?<\/em><\/li><li><em>An update on U.S. fiscal stimulus<\/em><\/li><li><em>U.S. returns expectations for 2020\u00a0<\/em><\/li><li><em>What produces 2020 optimism?\u00a0<\/em><\/li><li><em>And much more<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!\u00a0<br> <br><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2020_10_12&amp;content=stock_market_outlook_report\">IT&#8217;S FREE. Download the Just-Released October 2020 Stock Market Outlook<\/a><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2020_10_12&amp;content=stock_market_outlook_report\">3<\/a><\/sup><\/strong><\/p>\n\n\n\n<p>_____________________________________________________________________________<\/p>\n\n\n\n<p>While housing\nenjoys a strong year, the jobs market is rebounding but also struggling to claw\nits way back to pre-pandemic levels. In September, U.S. employers added 661,000\njobs, which was far below the 859,000 expected and marks a sharp slowdown from\ngains made over the summer. The U.S. has replaced 11.4 million of the 22\nmillion jobs lost to the pandemic, but momentum is likely to slow until the\nvirus comes under better control and\/or a vaccine is widely distributed.\nNeither outcome seems likely for 2020, which underscores the need for more\nfiscal stimulus before the end of the year, in my view. <\/p>\n\n\n\n<p>In late August, Federal Reserve Chairman Jerome Powell laid\nout a new policy vision for the Fed, indicating they would be implementing a\n\u201cflexible form of average inflation targeting.\u201d This was Fed-speak for saying\nthe Fed will allow inflation to drift above 2%, meaning they appear increasingly\nwilling to let inflation overshoot its targets in an effort to push\nunemployment back to its maximum level. 17 Fed officials said they believed\nrates would stay near zero until at least the end of 2021, with 13 officials\npushing the date further out to 2023.<sup>4<\/sup> For investors, the Federal\nReserve essentially codified \u2018lower for longer\u2019 interest rates in the third\nquarter. <\/p>\n\n\n\n<p>Finally, I think there have also been underappreciated,\npandemic-related positives supporting markets. In particular, the lower\nincidence of Covid-19 deaths in Q3 may help explain the relatively muted market\nresponse to rising infections. Over time, we have also gained a better understanding\nof the virus, which likely allowed risk assets to anticipate the\nquicker-than-expected restart. The U.S. health system is also much more\nprepared for hospitalizations today than it was three or six months ago. <\/p>\n\n\n\n<p><strong>What to Expect Ahead<\/strong><\/p>\n\n\n\n<p>I\u2019ll start with earnings. We expect total S&amp;P 500 earnings to decline -22.8% from the same\nperiod (Q3) last year, on -2.9% lower revenues. This earnings decline seems\nsteep, especially following the -32.3% decline in Q2 when economic and business\nactivities came to a halt as a result of the pandemic-driven lockdowns.<sup>5<\/sup>\nBut investors should focus less on the earnings decline and more on <em>how earnings expectations have changed over\ntime. <\/em><\/p>\n\n\n\n<p>In that light, the earnings\noutlook has been steadily improving since the start of Q3 (see the chart below).\nWhile the latest labor market and factory sector readings suggest some\ndeceleration in the recovery, we believe the economy will power-through and support\na sustained improvement to the earnings trend. In my view, if earnings are even\njust marginally better than what most expect, the stock market should feel the\ntailwind. <\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/motm_10062020-1024x640.png\" alt=\"\" class=\"wp-image-8905\"\/><\/figure>\n\n\n\n<p>Perhaps the\ntrillion-dollar Q4 question is whether Congress and the White House will ink a\ndeal for more spending. I personally think we will see more fiscal stimulus in\nthe next three to six months \u2013 which will be a boost for equity markets \u2013 but this\noutcome is far from assured. Most everyone on Capitol Hill (and at the Federal\nReserve for that matter) agrees that more stimulus is needed, but coming to\nterms on how much and where to spend has been elusive thus far. Look for an\nunexpected breakthrough in Q4. <\/p>\n\n\n\n<p><strong>Bottom Line for\nInvestors<\/strong><\/p>\n\n\n\n<p>\u201cUncertainty\u201d\nseems to be the word du jour for describing the United States\u2019 economic,\npolitical, and social situations. The economy has made strong gains off the\nbottom of the recession, but remains a long way off from pre-pandemic activity.\nSome of the gains from the summer were the low hanging fruits of economic\nrecovery, and I think more stimulus is needed to bridge the country to the\nvaccine. From what I can see today, the economy is not poised to go in reverse\nin Q4, but the tailwinds are fading. <\/p>\n\n\n\n<p>Even still,\nthe markets almost always move on expectations vs. reality, and if the economy\nand corporate earnings \u2013 and the election, for that matter \u2013 all post results <em>even just marginally <\/em>better-than-expected,\nstocks should do just fine in the next six months. <\/p>\n\n\n\n<p>With so much\nuncertainty, you may be wondering how to position your investments for success.\nTo help you make the most of the current, turbulent environment, I recommend\nsticking to the hard data and key fundamentals. To help you do this, I am offering all readers our&nbsp;<strong>Just-Released October 2020 Stock Market Outlook\nReport.&nbsp;<\/strong><br>\n&nbsp;<br>\nThis Special Report is packed with newly revised\npredictions that can help you base your next investment move on hard data. For\nexample, you&#8217;ll discover Zacks\u2019 view on:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Should you be worried about the 2020 Presidential Election?<\/em><\/li><li><em>What stocks could go up when vaccine distribution rolls out?<\/em><\/li><li><em>Signs of recovery in certain sectors<\/em><\/li><li><em>What of U.S. GDP Growth?<\/em><\/li><li><em>An update on U.S. fiscal stimulus<\/em><\/li><li><em>U.S. returns expectations for 2020\u00a0<\/em><\/li><li><em>What produces 2020 optimism?\u00a0<\/em><\/li><li><em>And much more.<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!<sup>6<\/sup><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The economy has rebounded from the recession\u2019s bottom, but uncertainty clouds the months ahead.<\/p>\n","protected":false},"author":3,"featured_media":8874,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-8904","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8904","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=8904"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8904\/revisions"}],"predecessor-version":[{"id":10532,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8904\/revisions\/10532"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=8904"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=8904"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=8904"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}