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“I believe in analysis and not forecasting.” – Nicolas Darvas
We’ve seen another strong night and morning of earnings reports with the vast majority of companies reporting better than expected earnings and revenues. Not only that, but a large number of companies have also raised guidance. By our count, we’ve already seen at least 13 earnings triple plays. That’s impressive! So what is the market’s reaction? Who cares? Tell me something I don’t already know.
Heading into this earnings season, analyst sentiment was very positive in terms of positive versus negative earnings revisions, and as we noted in our earnings season preview, that kind of positive sentiment often sets the expectations bar high for the following earnings season making it hard for companies to get over.
Besides earnings, concerns over COVID and the upcoming election are also weighing on investor sentiment. For many investors, the sentiment seems to be that given the uncertainty and range of possible outcomes, they would rather wait a week then make predictions as to the potential outcome.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, key earnings data from the US and Europe, trends related to the COVID-19 outbreak, and much more.
With hopes of a stimulus deal before the election officially off the table, the hope for many has been that a Biden win next week coupled with a Democratic takeover of the Senate would yield a large stimulus. That’s been the hope at least. Based on recent trends in prediction markets, a blue sweep next week isn’t looking like as much as a sure thing. Without even getting into the Presidential race (where Biden still has a comfortable lead based on the betting markets and polls), the Senate is looking closer. According to PredictIt, the contract for Republicans keeping control of the Senate is up to 47, which is the highest level in over a month. Of all the possible scenarios for the election outcome next week, the one that would be least ‘stimulus friendly’ would be a Biden win coupled with a GOP Senate.