It's earnings season, are we out of the woods yet?
What you need to know this week in 1:48 minutes - Oct 14, 2020
The past can hurt. But you can either run from it or learn from it.
It’s October and the Q3 earnings season is upon us. Every quarter publicly traded companies have to show us their hand. After hitting the trough of the Covid pandemic in Q2, Analysts will be looking at Q3 earnings to understand the speed of the recovery and how sustainable it may be. First up this week are the banks and financial institutions, so far Blackrock, Citi, and JP Morgan have surpassed expectations with strong performances across the board. Helped along by their investment banking divisions Citi and JP Morgan were able to offset anticipated losses from the commercial and retail banking arms. Banks are a strong bellwether for the economy and their performance may signal a recovery in motion.
Are we out of the woods yet?
We may not remember the rest of the lyrics to T-Swift’s song but the Bureau of Labor Statistics released their monthly inflation figures today. Economists were expecting inflation to be on the rise compared to last month, reflecting the change in policy adopted by the Fed back in late August to move from fixed inflation targeting to average inflation targeting based on an annual target. The IMF is also expected to publish its global financial stability report today. In its last report back in June, the IMF expected a 6.5% global economic contraction that we hope will be revised down significantly this quarter, as economic recovery globally has been (hopefully) better than initially expected. The worst expectation the report has ever issued was during the 2008 financial crisis, with an expected global economic growth of 0.3%, so this was, by far, the worst year for the global economy since the report started.
The Return of the Don:
Markets hate uncertainty, especially political uncertainty. It can give the market a bad stomach ache and cause an increase in volatility. After some market turmoil driven by The Donald’s positive COVID test and protocol, the Don tested negative this weekend. Hopefully, this should bring some “certainty” back to the market, as we’ve seen the VIX jolt up and down on this news over the last 10 days.
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