Investors Keeping Faith
As confirmed virus cases continue to grow across the U.S., predominately on the West Coast and in the Sunbelt, investors seem to be maintaining their confidence that a solution to the Covid-19 challenge is within sight. So far, the Federal Reserve and Congress have acted forcefully to shore up the economy during this crisis and progress is being made along many avenues on the medical front as well.
Second Quarter Earnings Down Sharply. . . But Not Horrific
As we get deeper into the second quarter earnings season, companies are reporting profit numbers that are slightly better than the grisly numbers analysts had penciled in. With about one-quarter of S&P 500 companies having reported, about 80% are doing better in terms of expected earnings-per-share (EPS) and around 70% have reported higher-than-expected revenues. Companies are, of course, mostly stepping over lowered bars that they themselves dropped as the virus spread. In aggregate, earnings are likely to be around 40% below the year-ago levels. In the big picture, though, earnings have been palatable to investors so far.
Market Forecast: Hazy With A Chance Of Storms
Most managements are reluctant to forecast the trajectories of their businesses for the second half of the year, given the economic disruptions. Investors, however, have mostly taken the cloudy views in stride. On July 22nd, the S&P 500 Index closed at 3276.02, its highest level since the lockdowns began and slightly above where it began the year. (It has given up a bit of ground since.) Considering what has happened to the U.S. and global economies in recent months and the amount of uncertainty we still face, most strategists agree that equities have notched an admirable performance. We believe investor optimism is largely rooted in the rapid headway that the many companies and entities working on Covid-19 vaccines and treatments are reporting.