{"id":9075,"date":"2020-11-30T16:37:11","date_gmt":"2020-11-30T16:37:11","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=9075"},"modified":"2022-02-26T13:06:00","modified_gmt":"2022-02-26T13:06:00","slug":"3-market-factors-to-watch-as-we-close-out-2020","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/3-market-factors-to-watch-as-we-close-out-2020\/","title":{"rendered":"3 Market Factors to Watch as We Close Out 2020"},"content":{"rendered":"\n<p>Many readers are ready for 2020 to be over. That\u2019s understandable.\nIn a year beset by losses for many families and businesses, and characterized\nby uncertainties of all stripes, it was a challenging twelve months to say the\nvery least. I encourage readers to think of the new year as a fresh start, and\na new chance for a positive outlook. <\/p>\n\n\n\n<p>I will write more in the coming weeks about what I see ahead in 2021, much of which is good news for the markets and the economy. For now, we still have a few weeks left in 2020 and there are a few key themes investors should keep an eye on.<\/p>\n\n\n\n<p><strong>1. Don\u2019t Underestimate the U.S. Consumer <\/strong><\/p>\n\n\n\n<p>The Commerce Department said Tuesday that retail spending\nrose 0.3% in October, a smaller increase from September and the smallest bump\nin retail sales since May. Many analysts saw the spending moderation as\nworrying, but I would not write off the U.S. consumer just yet. <\/p>\n\n\n\n<p>A strong rebound in spending was ushered in from fiscal\nstimulus and a better summer with the pandemic, making comparison growth harder\nto come by for October. Though the pandemic is surging back into a troubling\nphase, the holiday shopping season is here, and online shopping continues to\nthrive. Retail sales at non-store retailers (online) rose 3.1% in October,\nsignaling a shift in consumer behavior as winter approaches and as the pandemic\nworsens.<sup>1<\/sup><\/p>\n\n\n\n<p>Setting a lower bar for expectations of consumer spending\nthrough the end of the year may be a good thing, in my view. Underestimating\nthe U.S. consumer makes it easier for actual spending to exceed expectations.<\/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_11_30&amp;content=stock_market_outlook_report\">Key Data to Keep in Mind as You Prepare for 2021!<\/a><\/strong><\/p>\n\n\n\n<p>2020 has been a year made up of unpredictable events to say\nthe least. Facing so many uncertainties can cause investors to be hesitant\nabout their future decisions. In times like these, investors should not forget\nthe importance of focusing on the long-term even in the face of many short-term\nuncertainties. As 2021 rapidly approaches, I suggest focusing more on the hard\ndata and economic indicators that could impact your investments long-term. <\/p>\n\n\n\n<p>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<ul class=\"wp-block-list\"><li><em>Potential impacts of a Biden Presidency<\/em><\/li><li><em>How Covid-19 continues to impact travel, unemployment, consumer demand and more<\/em><\/li><li><em>Is it time to buy U.S. stocks in early November?&nbsp; <\/em><\/li><li><em>Zacks Rank S&amp;P 500 Sector Picks<\/em><\/li><li><em>The global response to the U.S. Election<\/em><\/li><li><em>What produces 2021 optimism?&nbsp;<\/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!&nbsp;<br> <strong><br> IT\u2019S FREE.&nbsp;<\/strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2020_11_30&amp;content=stock_market_outlook_report\">Download the Just-Released December 2020 Stock Market Outlook<\/a><strong><sup>1<\/sup><\/strong><\/p>\n\n\n\n<p>_________________________________________________________________________<\/p>\n\n\n\n<p><strong>2. Earnings Revisions May Temper, Opening the Door for Outperformance <\/strong><\/p>\n\n\n\n<p>For the 464 S&amp;P 500 companies that reported quarterly\nresults through mid-November, 84.5% beat EPS estimates and <em>a record<\/em> 75.6% beat revenue estimates. These beats are\nsignificantly above the levels we\u2019ve seen in recent years, and I would argue\nsupplied fuel for a big piece of the stock market\u2019s fall rally.<sup>3<\/sup><\/p>\n\n\n\n<p>In a typical quarter, we see companies lowering earnings\nexpectations throughout the earnings season \u2013 not so in Q4. <\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/motm_11282020_graph1.png\" alt=\"\" class=\"wp-image-9076\"\/><figcaption> <br><strong><em>Source: Zacks Investment Research<sup>4<\/sup><\/em><\/strong> <\/figcaption><\/figure>\n\n\n\n<p>However, in the next several weeks I expect many of these corporations to dial back some of their more positive outlooks, again as the pandemic enters a more alarming phase. This tempering of earnings expectations \u2013 much like the case with consumer spending \u2013 can be viewed as a positive. Lower expectations open the door for outperformance, which markets love. <\/p>\n\n\n\n<p><strong>3. Capital Rotation in the Stock Market<\/strong><\/p>\n\n\n\n<p>We noted some interesting trends during what I call the\n\u2018vaccine rallies,\u2019 during which the market bumped higher on news that Moderna\nand Pfizer had very effective vaccines. One trend was the shift from growth to\nvalue. The market posted its strongest one-day rotation into value stocks since\n2008, a sign that the bull market is gaining breadth and, in my view, becoming\nmore than just a rally off the bottom. <\/p>\n\n\n\n<p>We saw a similar trend in small-cap stocks, which\nhistorically have outperformed in early stages of new bull markets. In the\nfirst two weeks of November, small-caps as measured by the Russell 2000 rose\n+13%, its best two-week start to a month on record. This outperformance marked\na stark contrast from earlier in the year, when the pandemic arguably inflicted\nthe most damage on small-cap companies.<sup>5<\/sup> Should small-cap stocks\ncontinue performing well for the balance of the year and into 2021, it could be\na sign that the economic recovery is ready to charge ahead in the new year.<\/p>\n\n\n\n<p><strong>Bottom Line for\nInvestors <\/strong><\/p>\n\n\n\n<p>2020 has been a challenging year for many, no matter how you\nlook at it. But I think it is important to keep in mind how resilient the\neconomy and stock market ultimately were in the face of very challenging\ncircumstances. It\u2019s a reminder that even the darkest of times can be overcome.<\/p>\n\n\n\n<p>For the balance of the year, it will be key to watch how consumers respond to the\nincreasing threat of the pandemic, how corporations adjust earnings\nexpectations as a result, and how capital continues to rotate around the\nmarkets. Above all, investors should start looking ahead to better times in\n2021, which is what I think the stock market has been doing.&nbsp; &nbsp;<\/p>\n\n\n\n<p>To help you position yourself for such a positive outcome, I recommend focusing on hard data and economic indicators that could positively impact your investments in the long-term. To help you do this, I am offering all readers our\u00a0<strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2020_11_30&amp;content=stock_market_outlook_report\">Just-Released December 2020 Stock Market Outlook Report<\/a>.\u00a0<\/strong><br> \u00a0<br> This report looks at several factors that are producing optimism right now and contains some of our key forecasts to consider such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Potential impacts of a Biden Presidency<\/em><\/li><li><em>How Covid-19 continues to impact travel, unemployment, consumer demand and more<\/em><\/li><li><em>Is it time to buy U.S. stocks in early November?&nbsp; <\/em><\/li><li><em>Zacks Rank S&amp;P 500 Sector Picks<\/em><\/li><li><em>The global response to the U.S. Election<\/em><\/li><li><em>What produces 2021 optimism?&nbsp;<\/em><\/li><li><em>And much more<\/em><\/li><\/ul>\n\n\n\n<p>\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!<br><br><\/p>\n","protected":false},"excerpt":{"rendered":"<p>We\u2019re all ready for this year to end, but here are 3 themes to monitor as 2020 draws to a close <\/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-9075","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\/9075","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=9075"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9075\/revisions"}],"predecessor-version":[{"id":10500,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9075\/revisions\/10500"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9075"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9075"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9075"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}