Recovery Slows in the Midwest, Deflation Risk, and Earnings Beats Hit Record Pace
October 28, 2020 | FIRESIDE CHARTS
Economic activity in the Midwest has taken a hit as Covid-19 spreads across the U.S. at its fastest pace since the onset of the pandemic; the Chicago Fed National Activity Index came in at about a third of the expected result in October. Consumers are continuing to curb spending in response to the pandemic and while that’s likely contributed to the boost in average FICO scores, it also poises significant deflationary risk. Earnings meanwhile have offered some pleasant surprises—S&P 500® Index earnings beats are coming in at a record pace—and this comes among a season where the ratio of guidance coming in above consensus verses below is also at record highs. Does this bode well for Q4, or will performance be undercut by the lingering—and accelerating—threat of Covid-19?
1. The Midwest has been hit hard by Covid and it is showing up in the regional Fed numbers…
Source: The Daily Shot, from 10/27/20
2. …But all is well in the heart of Texas!
Source: The Daily Shot, from 10/27/20
3. Uncertainty, savings and Covid-related stay-at-home lack of spending has significantly reduced the velocity of money which is deflationary…
Source: The Daily Shot, from 10/28/20
4. Is Covid-induced reduction of spending allowing consumers to pay off debt and improve their credit even further?
Source: The Daily Shot, from 10/27/20
5. The baby boom echo (boomers’ kids) has been waning for years. Fewer children and young adults means less spending which will be an economic headwind…
Source: The Daily Shot, from 10/28/20
6. Projecting earnings in the Covid environment is more difficult, but the good news is that earnings are coming in better than expected…at a record pace!
Source: The Daily Shot, from 10/27/20
7. For those companies able to give guidance, those who guide higher you are handsomely rewarded; yet if companies miss, they are being zealously punished…
Source: BofA Global Research, from 10/27/20
8. 1872 was a long time ago, but here is the long-term average market performance with various party wins…
Source: The Daily Shot, from 10/27/20
9. Value stock’s underperformance can’t last forever, but it has underperformed for long periods of time before…
Source: The Daily Shot, from 10/27/20
10. China’s economy is arguably now the world’s largest. While it is still quite varied, it appears askew to classify them as “emerging” with this kind of economic dominance…
Source: The Daily Shot, from 10/27/20
11. What is worse, wearing a mask in public or enduring another economic shutdown?
Source: The Washington Post, from 10/27/20
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.