Our just released stock market outlook report will answer\nthis question and more! The stock\nmarket proves that it responds far more to long-term earnings and economic growth\ntrends over politics. With this election year coming to an end and new\npositives unfolding within the market, I suggest focusing more on the hard data and economic indicators\nthat could positively impact your investments instead of getting caught up in post-election\nchallenges. <\/p>\n\n\n\n
To help you do this, I am offering all readers our\njust-released Stock Market Outlook report. This report contains some of our key\nforecasts to consider such as:<\/p>\n\n\n\n
- Potential impacts of a Biden Presidency<\/em><\/li>
- How Covid-19 continues to impact travel, unemployment, consumer demand and more<\/em><\/li>
- Is it time to buy U.S. stocks in early November? <\/em><\/li>
- Zacks Rank S&P 500 Sector Picks<\/em><\/li>
- The global response to the U.S. Election<\/em><\/li>
- What produces 2021 optimism? <\/em><\/li>
- And much more<\/em><\/li><\/ul>\n\n\n\n
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!
IT\u2019S FREE. Download the Just-Released December 2020 Stock Market Outlook<\/a>1<\/a><\/sup><\/strong><\/p>\n\n\n\n_________________________________________________________________________<\/p>\n\n\n\n
The stock market is arguably looking ahead to\na post-pandemic economy and a Biden administration with a divided Congress. In\n46 years when power was split between the White House and Congress, the average\nS&P 500 return was +7.26%. Interestingly, for investors looking for\nhistorical stock market data under a Democratic president, a Republican Senate,\nand a Democratic House, you won\u2019t find any \u2013 this division of power has not occurred since 1886<\/em>.2<\/sup><\/p>\n\n\n\n
Wall\nStreet may also be pricing-in some of the policy constraints a Biden\nadministration may face with a divided Congress. In particular, there appears\nto be little chance we will see corporate and capital gains tax increases in at\nleast the next two years, but perhaps for Biden\u2019s entire term. Any prospect of\nsweeping legislation that could change property rights or fundamentally alter a\nsector \u2013 like Energy and Health Care \u2013 also appear low. <\/p>\n\n\n\n
Meanwhile,\nthe prospect of more fiscal stimulus has risen, as Biden has a history of\nbi-partisan cooperation and both parties agree on the need for more spending\n(though the amounts vary greatly). The next few years may also feature an ease\nto trade tensions across the world, and more cooperation with allies in foreign\npolicy affairs. We do not expect any change to monetary policy. <\/p>\n\n\n\n
Don\u2019t Forget About the Most Important Stock\nMarket Driver<\/strong><\/p>\n\n\n\n
With\nall of the focus on the election and policy, perhaps the most important driver\nof stock market returns over the long-term \u2013 corporate earnings \u2013 has received\nvery little attention. But that\u2019s a mistake, in my view. I would argue a great\ndeal of the stock market\u2019s recent strength has been driven by earnings.<\/p>\n\n\n\n
We now\nhave Q3 earnings results from 447 S&P 500 members (as of November 6), with\ntotal earnings for these companies down -7.3% from the same period last year on\n-1.9% lower revenues. 3<\/sup> Readers may note the negative performance\nand wonder how these results can be good. But what matters most with earnings,\nin our view, is whether a large share of companies are exceeding expectations.<\/p>\n\n\n\n
They\nare! Of the 447 reporting companies, 85.2% of them beat earnings-per-share\n(EPS) estimates, and 76.3% beat revenue estimates. If 86% ends up being the\nfinal percentage of companies exceeding EPS expectations, it will mark the\nbiggest positive EPS surprise since 2008. This metric is a big deal, in my\nview. <\/p>\n\n\n\n
Looking\nahead, estimates for Q4 earnings continue to move higher, as corporate America\nproves more resilient in the pandemic than just about every analyst\nanticipated. <\/p>\n\n\n\n
![\"\"](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/motm_11102020-1024x640.png\")
<\/figure>\n\n\n\nWhen it comes to the stock market and earnings, the\noperative phrase is \u201cbetter than expected.\u201d And that\u2019s what we\u2019re seeing now. <\/p>\n\n\n\n
Bottom Line for\nInvestors <\/strong><\/p>\n\n\n\n
The stock market may also be responding to positive news\nrelated to the vaccine. According to reports last week, Pfizer\u2019s vaccine\ncandidate was more than 90% effective in preventing participants from\ncontracting Covid-19 \u2013 a very good early sign. Though we are still likely\nmonths away from having a vaccine widely available, the light at the end of\nthis pandemic\u2019s tunnel is increasingly visible, in my view. <\/p>\n\n\n\n
Stocks have somewhat of a hurdle to climb in the coming year\nto keep moving higher. As it stands today, the S&P 500 trades at a forward\n12-month multiple of 21.6x. This valuation is well above the 10-year average of\n15.5x, but as I\u2019ve written before, near-zero interest rates arguably give\nvaluations more wiggle room to the upside. If corporate earnings can catch up\nin the coming quarters, this bull market may have plenty of room to run.4<\/sup><\/p>\n\n\n\n
With the current standing of the market, earnings and the\nCOVID-19 vaccine, we are looking at a bright future ahead in 2021. With that, I\nrecommend not getting caught up in post-election controversy and instead focusing\non the long-term outlook. To help\nyou do this, I am offering all readers our Just-Released December\n2020 Stock Market Outlook Report. <\/strong>
\n
\nThis report looks at several factors that are\nproducing optimism right now and contains some of our key forecasts to consider\nsuch as:<\/p>\n\n\n\n- Potential impacts of a Biden Presidency<\/em><\/li>
- How Covid-19 continues to impact travel, unemployment, consumer demand and more<\/em><\/li>
- Is it time to buy U.S. stocks in early November? <\/em><\/li>
- Zacks Rank S&P 500 Sector Picks<\/em><\/li>
- The global response to the U.S. Election<\/em><\/li>
- What produces 2021 optimism? <\/em><\/li>
- And much more<\/em><\/li><\/ul>\n\n\n\n
\n\n\n\nIf you have $500,000 or more to invest and want to\nlearn more about these forecasts, click on the link below to get your free\nreport today!
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- How Covid-19 continues to impact travel, unemployment, consumer demand and more<\/em><\/li>
- How Covid-19 continues to impact travel, unemployment, consumer demand and more<\/em><\/li>