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 October 17–23, 2020.

The week that was

  • Earnings and stimulus talks dominated the headlines for the week.
    • With earnings reports from 25% of the companies in the S&P 500 Index over the past couple of weeks, the surprises have been generally to the upside.
    • But the broader direction of the U.S. market has been swinging with the status of stimulus talks between House Speaker Pelosi and Treasury Secretary Mnuchin. The latest twist is that Senate Leader McConnell said Senate Republicans don’t want to vote on the topic before the election. Apparently, the campaign needs of the Republicans in the Senate are at odds with the campaign needs of President Trump. While the president might want this as a victory before the election, Senate Republicans might not want to upset those voters who generally favor less government spending rather than more.



  • China’s third-quarter gross domestic product (GDP) rose 4.9% year over year. In September, industrial production rose 6.9% year over year and retail sales rose 3.3% year over year.
  • The Federal Reserve’s Beige Book, a collection of qualitative information gathered from around the country, said “changes in activity varied greatly by sector.” Real estate has been bifurcated, with residential housing doing quite well but commercial real estate conditions deteriorating. The economy is growing, but it’s at a very uneven pace and uneven pattern across the country. There has been a resurgence in COVID-19 cases, and depending on where you live, restrictions have been more or less severe.
  • Speaking of bifurcated, the purchasing managers’ indices for the eurozone were released. The service sector weakened under the weights of renewed restrictions on activity. However, the manufacturing sector stayed in expansion territory, likely thanks to continued strong foreign demand.



  • The Labor Party in New Zealand, headed by Prime Minister Jacinda Ardern, won 49% of the popular vote in New Zealand elections and 64 out of 120 seats in parliament. This is the first time a party has won an outright majority of seats in parliament.
  • The U.K. and European Union are resuming trade talks. They are hoping to come to an agreement by mid-November.
  • The Senate Judiciary Committee advanced the nomination of Judge Barrett for the Supreme Court to the full Senate. Senate Majority Leader McConnell said the Senate will vote on Monday.


The week to come

  • Third-quarter earnings season continues. At the beginning of earnings season, the consensus was looking for year-over-year average earnings growth for companies within the S&P 500 Index of -20.5% and an average sales decline of 3.55% year over year. For the 25% of S&P 500 companies that have already reported results, the average growth rate of earnings is coming in at -17% and sales are on pace to fall 3%.
  • On Monday, U.S. new-home sales for September will be released. On Tuesday, we get durable goods orders for September and consumer confidence results for October.
  • Japan will release a monetary policy decision on Wednesday, as will Canada. The European Central Bank will release its policy statement on Thursday.
  • Some of the biggest news will be around GDP growth in the third quarter. The U.S. releases its first guess at third-quarter growth on Thursday. The consensus seems to be calling for an annualized growth rate of 28%, after an annualized contraction of 31% in the second quarter. Across the eurozone, GDP numbers are scheduled to come out Friday. Eurozone GDP shrank 14.7% year over year in the second quarter, and the consensus is looking for a 7.6% year-over-year decline in the third quarter. It’s sometimes hard to compare GDP growth across countries, since there are different conventions. In the U.S., the number is typically a quarterly number but annualized. Other countries typically just report the quarterly growth number without annualizing it. Annualizing the numbers can make the swings seem bigger than they really are. Eurozone growth in the second quarter was -11.8%, which is -56% when annualized. The U.S.’s 31.4% decline in the second quarter was “only” -9% on a quarter-over-quarter basis without annualizing.
  • Friday night, China’s purchasing managers’ indices for October are released.

Thanks for reading, stay informed!

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