Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.
This week will be the busiest week for earnings season with 37% of S&P 500 earnings reporting. So far, 127 companies, representing about 40% of index earnings, have reported with 77% beating earnings per share estimates, 73% beating sales estimates, and 61% beating both EPS and sales. All numbers are higher than average as expectations had been cut heavily due to the lack of transparency and the various scenarios that could have played out with COVID-19. Investors initially gave companies a free pass as markets rallied through May and June. With more transparency around earnings, investors will be able to formulate better what fair value is for many companies. Investors have punished those companies that have missed on both EPS and sales. In an investment environment where passive equity investing has gained over 60% market share, it’s healthy to see individual companies get rewarded and punished on their own merits. Earnings (specifically earnings growth) are a large component of long-term equity returns. Market consensus had priced in a terrible second quarter, and so far it seems the bar was set too low. Looking out to the third quarter, consensus has already priced in a fairly robust rebound, even with transparency still fairly opaque. As we’ve said many times before, markets typically overshoot on both the downside and upside.
After last week’s relatively modest flow of economic data, the week ahead will be jam packed with important data points reporting each day. As my colleague Brett Dulyea mentioned in last week’s update, retail sales have continued to surprise on the upside. We’ll get a look a better look at how some of the larger ticket items fared in June via Monday’s durable goods orders report. We’ll also see if June can build upon May’s +15.8% rebound (much needed!) after March’s -16.7% and April's -18.1%. The Fed will provide their July rate decision (expect no change for rates) and we’ll finally get our first look at the damage done by COVID-19 in the second quarter as we get the first estimate for U.S. GDP on Thursday.
Data deck for July 25–July 31
|
Date |
Indicator |
Period |
|
July 27 |
Durable Goods Orders |
June (Preliminary) |
|
July 28 |
Consumer Confidence |
July |
|
July 28 |
Case-Shiller Home Price Index |
May |
|
July 29 |
Pending Home Sales |
June |
|
July 29 |
FOMC Rate Decision & Press Conference |
---- |
|
July 29 |
Wholesale Inventories |
June (Preliminary) |
|
July 29 |
Advance Goods Trade Balance |
June |
|
July 30 |
Initial Jobless Claims |
---- |
|
July 30 |
U.S. GDP 2nd Quarter |
2Q2020 |
|
July 31 |
Chicago Purchasing Managers Index |
July |
|
July 31 |
University of Michigan Consumer Sentiment |
July |
|
July 31 |
Personal Spending |
June |
|
July 31 |
PCE |
June |
|
July 31 |
Employment Cost Index |
2Q2020 |
