Sometimes in life it’s not so much what you do, it’s what you do relative to what the world expects of you, like Lloyd Christmas in Dumb & Dumber, totally redeeming himself in the eyes of Harry Dunne when he trades their van “straight up, to a kid in town” for a moped that gets 70 MPGs. The same dynamic applies to Wall Street, specifically when it concerns how corporate earnings come in relative to what investors expected. A case in point is Q2 2020 earnings season. It has been a doozy of an earnings season for the companies that make up the S&P 500 Index, with earnings off 30% year-on-year, the worst since Q1 2009, when the country was in the midst of the Great Recession. While a 30% haircut in earnings is painful, the world thought results were going to be even worse as we entered Q2 earnings season. In fact, with 499 of the S&P 500 companies having reported quarterly earnings results, 83% have topped expectations, the highest percentage on record, dating back to 1994, and well above the long-term average of 65%. That quarterly performance relative to investors’ expectations – and what it says about the disconnect between how Wall Street thought the economy was performing and how it actually was performing – are important, and legitimate, catalysts for the dramatic rally in US equities these past several months. Finally, with the S&P 500 Index up 1.41% since August 3, our Election Countdown Calculator is indicating President Trump will win reelection come November 3.
The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a registered investment advisor.
Tagged: weekly wire, market perspectives, Tim Holland, S&P 500 Index, Presidential election, Election Countdown Calculator, earnings season