After posting several videos, we decided to send some written word – these are some of our favorite charts to start the last week of October. With the talk of a third wave of COVID (oh, and an election), it is easy to feel negative.
We are told that pilots occasionally must fly through fog and clouds, using their instrument panel as a guide. The below charts help to serve us as an instrument panel in managing your wealth.
We have entered the 4th quarter of 2020 (thank goodness), and it’s earnings season! Stock price reactions to earnings haven’t been particularly strong, but both earnings and revenues have been exceeding analyst forecasts at a much better than average pace.
And, besides the stronger than average EPS and revenue beat rates, the pace of positive guidance from Corporate America continues to surge to record highs. This means they think it’s going to get better from here.
Despite concerns of a slowdown in the recovery, Markit’s Composite PMI (which is a measure of both manufacturing and service sectors) is showing the strongest rate of expansion since February – of 2019! That's good news for the economy.
September was 'singles' month in the residential housing sector. Both single-family Housing Starts and Permits hit new highs for the cycle.
There has never been a time when Leading Indicators saw this large of an increase from its low with the economy still in recession. Conclusion? The COVID recession most likely ended months ago even though NBER has yet to make it official.
This is probably the most eye-opening chart we saw this week. While restaurants have been among the hardest-hit sectors from shutdowns and social distancing, publicly-traded restaurant stocks have just hit new all-time highs. While we may question how this could be, part of managing a company is keeping expenses reined in. The majority of these companies have done a pretty exceptional job.
Last Sunday was a milestone day for US airline passenger traffic as more than a million people flew the friendly skies. Since then, though, passenger traffic has been down on a week/week basis every day.
With polls suggesting that a ‘blue sweep’ may be coming on Election Day, long-term interest rates are starting to price in a big stimulus bill. We have heard the following:
- $600 billion if Biden wins with a GOP Legislative Branch
- $1.5 trillion if there is a GOP sweep
- $3.5 trillion if there is a Democratic sweep
This is pushing the yield curve (interest rates on U.S. Government bonds) to the highest levels since late March, and is why we’ve begun blending in some Treasury Inflation Protected Securities (TIPS) into bond portfolios. This is also the main reason Financial stocks bounced back this week.
And last but not least, Biden’s betting odds to win are now just over 60%. At this point in 2016, Clinton's odds to win were at 83%. Is a Blue Wave coming or will we get another Red Upset? We'll find out on November 3rd (or a few weeks later 😳).
(Source of all charts: Bespoke Investment Group)