Undoubtedly, what is left of October will be marked by two major factors: the first is the pre-election climate in the United States and the stimilus package.
The second factor but not less important, is the Earnings Season in the US, which will begin on Tuesday the 13th.
So far, the Earnings Season presents scary numbers: a reduction in the Earnings per Share of -21% compared to the same quarter of the previous year.
Fuente: Fuente:I/B/E/S data from Refinitiv. Fecha: 25/09/2020.
As always, banks and financial institutions will kick off the Earnings Season. Usually, they are the ones who set the tone of the next publications.
As we see in the chart, the earnings by sector follow the typical cyclical pattern during a recession, with the exception of the technology sector.
Fuente:I/B/E/S data from Refinitiv. Fecha 08/10/2020.
As we mentioned in the post Technology: Cyclical Sector?, it seems that technology has ceased to be a cyclical sector. Now, it is becoming a more of a consumer good, with a great impact on the wealth generation and indispensable for the productivity of the economy.
In conclusion, despite the fact that a lot of people has their eyes set on the elections, we must not ignore the Earnings Season, which is key to the economic recovery.
Probably, as in most quarters, between 60% and 70% of American companies will beat analysts expectations, and that figure could be bigger because the expected earnings are bad.
In fact, during this last two weeks, estimates are being revised upwards. Next week we will see if the markets take these results with optimism.