Every Friday, Brian Jacobsen provides perspective on key events and topics of the current week and his thoughts about what the week ahead may hold. Here’s his report for the week of August 1–7, 2020.

The week that was

  • Earnings season is wrapping up. According to FactSet, companies within the S&P 500 Index were expected to see an average 44% year-over-year decline in earnings per share in the second quarter. But based on second-quarter results from the 85% of S&P 500 companies that have already reported, the estimate has been beaten as average earnings were down approximately 34%.
  • White House and Democratic leaders seem to be at an impasse on a fifth round of stimulus—and even on extending or renewing the enhanced unemployment benefits that expired at the end of July.


  • The U.S. Institute for Supply Management (ISM) Manufacturing Index rose to 54.2 in July as economic activity accelerated. Of the 18 industries covered by the index, 13 of them reported growth in July. Transportation equipment, machinery, and fabricated metals reported declines in activity. The ISM’s survey showed production and new orders climbing above 60, which is the strongest in a couple of years.
  • Argentina and its largest creditors came to an agreement about how to restructure $65 billion of the country’s debt. Since 2000, the country has defaulted on its debt three times. Maybe the third time’s the charm?
  • The Reserve Bank of India (RBI) left its policy rate unchanged at its latest meeting. Its policy rate is 4.0%. RBI Governor Das said banks will be allowed to restructure loans rather than just extend a moratorium on repayments. For many years, India’s banks have been viewed as hampering growth with lots of nonperforming loans. Getting them to restructure loans instead of just following a “delay and pray” approach can be viewed as a positive step toward cleaning up India’s banking sector.
  • The Bank of England (BOE) didn’t alter the stance of monetary policy at its latest meeting. Its policy rate is 0.1%. Governor Bailey indicated the BOE isn’t keen on considering negative interest rates and questions their effectiveness, especially as compared with asset purchases. The BOE’s Monetary Policy Committee released economic projections that suggest the hit from COVID-19 will likely be closer to 9% than to the original projection of 14%, but Governor Bailey insisted there was an “awful lot of risk” in the projection. The U.K. is not only on the rocky road to recovery from the coronavirus—it’s also dealing with Brexit, and not much progress has been made on achieving a deal with the European Union by the end-of-year deadline.
  • The Reserve Bank of Australia didn’t change the stance of its monetary policy. It does expect the economic situation to get a little worse with the rise in COVID-19 cases and the associated shutdown situation in Victoria. The policy statement said negative interest rates are “extraordinarily unlikely” and that monetary financing of budget deficits is “not an option under consideration.”
  • In the U.S., nonfarm payrolls rose 1.763 million in July. That beat the consensus estimate, but it was a slowdown from June’s 4.791 million number. The unemployment rate fell to 10.2%.


  • White House, Senate, and House negotiators said they were making progress on a fifth coronavirus relief bill. Enhanced unemployment benefits of $600 per month and an eviction moratorium expired at the end of July.
  • The U.S. and China will hold talks on August 15 to review how the Phase One trade deal is going. The original agreement said they would periodically review progress toward their goals, so this wasn’t too much of a surprise.
  • Turkey’s lira hit a new low versus the dollar. Turkey’s foreign exchange reserves have been shrinking, and Turkey’s government has been leaning on state banks to prop up the lira by selling dollars.
  • President Trump reimposed a 10% tariff on Canadian aluminum.
  • President Trump also signed an executive order prohibiting U.S. residents from doing business with TikTok, WeChat, or the apps’ China-based owners beginning in 45 days. The order cited national security risks associated with exposing U.S. citizens’ personal data.

The week to come

  • As earnings season slows down, the economic calendar is getting a bit more crowded. Going into earnings season, average sales for companies comprising the S&P 500 Index were expected to fall 11% on a year-over-year basis, according to FactSet. With 85% of S&P 500 companies reporting, sales were on pace to fall 9.6%.
  • Sunday night and Monday morning, China will release its July inflation and loan growth data. Producer prices’ inflation has been stubbornly weak.
  • On Tuesday, the Germany ZEW Indicator of Economic Sentiment and the U.S. National Federation of Independent Business (NFIB) Small Business Optimism Index are released. The prior is a gauge of financial analysts’ sentiment, and the latter is a read on small business sentiment.
  • On Tuesday, the U.K.’s gross domestic product results and U.S. inflation data for the second quarter are released.
  • On Friday, U.S. retail sales and industrial production numbers for July are released, and so is the preliminary reading for the University of Michigan Consumer Sentiment Index.

Thanks for reading, stay informed!

CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

The Germany ZEW Indicator of Economic Sentiment measures the level of optimism that analysts have about the expected economic developments over the next six months. The survey covers up to 350 financial and economic analysts.

The National Federation of Independent Business (NFIB) Small Business Optimism Index—a composite of 10 seasonally adjusted components—provides an indication of the health of small businesses in the U.S.

The University of Michigan Consumer Sentiment Index is a consumer confidence index published monthly by the University of Michigan.

Index definitions



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