If You Don't Expect Much, You Won't Be Disappointed!

According to FACTSET:

S&P earnings growth for Q2 2020 is for an earnings decline of -44.6%. If this in fact is reality, it will be the largest decline since Q4 2008.

Industry analysts predict that the S&P 500 will close above 3,350 in the next 12 months!  A gain of approximately 7%.

For those very interested in the details: https://www.factset.com/hubfs/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_071020.pdf

According to Refinitiv:

Second quarter earnings are expected to decrease 54% from Q2 2019, take away energy sector, decrease is expected to be 45.7%

Second quarter revenue is expected to decrease 17.2% from Q2 2019

For those interested in the details: https://lipperalpha.refinitiv.com/2020/07/stoxx-600-earnings-outlook-17q1/

Combine the relatively low expectations with the creativity that companies can use to report and it should not be a surprise that on an earnings basis the market should hold up. The problems start when one considers:

U.S./China relations are deteriorating on a daily basis:

U.S. is directly challenging China’s South Sea claims

US officials have been sanctioned by Beijing for meddling in human rights issues.

US sends surveillance aircraft to Chinese coast as Taiwan drills start.

US citizens warned of increased “arbitrary detention” risk.

Trump says phase 2 trade deal is not going to happen before election.

U.S. threatens to force Chinese companies to delist on U.S. exchanges.

U.S. says Chinese students will not get visas if the U.S. college courses are strictly online.

U.S. imposes sanctions due to Tibet.

U.S. looking to sanction TikTok over data concerns.

Trade, Human rights, Hong Kong, Taiwan, Intellectual property rights, the list goes on and on.

How far will the hostilities escalate as we move toward the upcoming election?

Unemployment in the U.S. and globally is not as positive as the market seems to think.

Will be interesting to see how much improvement we see into November.

One can hope we see dramatic improvement, but the recent news from Texas, Florida and California needs to turn quickly. We can hope for a New York style recovery.

The graph on the lower right:



EURNOK has traded 10.60 to 10.80 so far in July. (the big moves up are fictive prices during Asia time, ignore)

The daily VIX chart showing a break out of the wedge formation. Trouble ahead for risk? Above 33 is trouble we will be accompanied with risk off.

Will the S&P break out of the current formation with a whimper or a bang?

The USD Index seems to mirror the above charts, heading for a move one way or the other….

Contact us if you are interested in receiving real time trading signals. In doubt? Check out our track record below!

TickerDate OpenedEntry PriceStopTarget PriceCurrent Price% Change
LONG Austevoll Seafood ASA (AUSS:xosl)2020/06/0276.7572.00SPREAD TRADE79.45+3.52%
SHORT Leroy Seafood Group ASA (LSG:xosl)2020/06/0256.75SPREAD TRADESPREAD TRADE54.40+4.14%

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2018: 45 Trades, Hit Ratio 53,66%, Profit +35,87 %
2019:   31 Trades, Hit Ratio 45,16%, Profit +26,97%

– Mark W

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