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Earnings season is expected to be a dud. Stocks are taking off

July 13, 2020, 9:33 AM UTC

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Good morning, Bull Sheeters. It’s a strong start to the trading week with Asian and European equities gaining ground, and U.S. futures edging higher as well. Investors are in a risk-on mood as we turn our attention to Q2 corporate results. The forecast for earnings season is hardly a bullish one, but it should prove to be a bit of a welcome distraction from the coronavirus crisis.

Let’s see where investors are putting their money.

Markets update


  • The major Asia indexes are in the green in afternoon trade. After its sizzling eight-day rally was snapped on Friday, the Shanghai Composite Index is up 1.8%.
  • Huawei is trying to convince Britain not to kick it out of its 5G rollout plans for at least another five years, the Sunday Times reports.
  • India’s coronavirus crisis is worsening, but tech observers are seeing a fascinating adaptation occurring in everyday life: digital payments are soaring.


  • The European bourses jumped in early trade with Germany’s DAX up 1.2% at the open.
  • It’s a big earnings week in Europe with financials, auto and consumer product stocks on the calendar, an important first glimpse into the virus’ impact on Q2 business.
  • Credit Suisse is mulling hundreds of job cuts, the Swiss press reported this weekend, as the coronavirus throws the banking giant’s restructuring plans into disarray.


  • For the second time in the past three weeks, the major averages each notched a week of gains, with airlines and financials closing strongly on Friday.
  • Tesla has cut the price tag of its Model Y. But don’t worry about Elon Musk’s finances. He added $6.1 billion to his personal wealth on Friday after the stock soared 11%.
  • The big banks (including JPMorgan Chase tomorrow), airlines and Netflix are all scheduled to report Q2 results this week. According to FactSet, investors should brace for an earnings decline of 43.8% for S&P 500 firms, the worst set of numbers since 2008.


  • Gold is up.
  • The dollar is flat.
  • Crude is down as traders expect producers to ask for a tapering of supply cuts at this week’s OPEC meeting.


A blue autumn?

Let’s talk politics. Election Day is a mere 113 days out, and Wall Street is increasingly weighing the odds of what a Democrat or Republican in the White House—and controlling Congress—will mean for your portfolio.

But first, let’s check in on those always-reliable polls. This morning, Real Clear Politics’ polls average showed Joe Biden with a 9-point lead. The PredictIt betting-odds site shows an even bigger margin for Biden. (News flash: President Donald Trump is not having a good pandemic.)

So, let’s assume (gulp) the pollsters, pundits and oddsmakers are correct in their thinking that there will be a Democrat in the White House. Time to liquidate your equities portfolio, stockpile gold and move the family to an off-shore hideout? Erm, no.

Nobody’s really freaking out about the prospect of a Joe Biden presidency as the odds improve in his favor. JPMorgan says it might even be good for stocks. UBS concurs. Yes, a Democrat in the White House is more likely to result in a hike of the corporate tax rate and tighter regulatory oversight of health care, finance, and energy sectors, but that’s no reason to bail on risky assets like stocks, the analysts say.

What’s more, the data (and history books) show that a Democrat in the White House is both good for the economy and good for the stocks markets. In fact, going back to 1950, Democrat presidents have a better track record of growing the economy than their GOP rivals. And a Dem in charge has been a pretty good indicator for stocks too, as the following table from LPL Research shows.

And, yes, I have to note right here: past-performance is no indicator of future results. But the past performance makes you wonder why Wall Street over the years has been so fearful of the prospect of Democrats in charge.

I wrote about this for an article that appeared on over the weekend. There are a lot more data points, including a fascinating chart about the Dow performance under presidents going all the way back to President William McKinley. Again, the Dems (at least, lately) have a big advantage over the GOP.

Surprised? I was.

Take a look at the article, and let me know what you think.



When I was a kid, my brothers and I were crazy about Sergio Leone’s Spaghetti Westerns, particularly the ones starring Clint Eastwood. The gunfights. The snarls. The whole bad-assery of it kept us riveted, hand pistols drawn at the screen.

But what made the films such classics was Ennio Morricone’s soundtrack. That piercing coyote-howl from The Good, The Bad and The Ugly goes down in the discussion of greatest movie scores of all times.

So I, like much of Italy, was really saddened by the news last week that, Morricone, the maestro, had died at 91. Italy is a land of musical geniuses. Verdi, Puccini and Rossini make up the composer trinity, with Morricone not that far below them.

In the days following his death, spontaneous tributes broke out across the country. From humble town squares to the grand piazzas of Rome, musicians took out their instruments and played the maestro’s songs that influenced them most.

A few years ago, I blagged a few tickets to see Morricone at a concert held inside the Vatican. He shuffled onto the stage and directed the orchestra in a few songs, before handing over the reins to a younger conductor.

In a sign that I’m getting old and losing my edge, I’ve come to prefer Morricone’s mellower, more melodic pieces. Probably top of the list is “Gabriel’s Oboe,” from The Mission. The Yo-yo Ma version is a stunner, but the one that really blew me away was a performance (being Italy, it was a free concert) I heard one hot summer evening in a hilltop town in the middle of nowhere, in Central Italy.

We were at a 13th century church that had been turned into an impromptu concert hall. The kids were four-years-old. They were hot, and cranky. There were no seats, and so somebody directed my wife and I and the girls to sit right next to the musicians. I was close enough to hand one a water bottle without needing to get up out of my seat.

When the oboist hit those first stirring notes of “Gabriel’s Oboe,” the whole place went in a trance. Better yet, the kids were mesmerized. It was one of those (many) moments I was just lost in the beauty of this place.

I have many Morricone memories. That’s the one I’ll most cherish.

Buonanotte, maestro.

Bernhard Warner

A note from my Fortune colleagues on a timely new initiative:

Many companies are speaking out against racial injustices right now. But how do they fare in their own workplaces? Black employees in the corporate world, we want to hear from you: Please submit your anonymous thoughts and anecdotes here.

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Today's reads

The economy in 8 charts. How's the U.S. economy doing? Is it rebounding at a pace to justify this two-month bull runFortune's data whiz, Lance Lambert, takes you into the state of the world's biggest economy in eight eye-popping charts.

"Zero chance." Those are the odds of a V-shaped recovery, a Moody's economist recently told Fortune. So if America's economic rebound isn't going to be a quick and painless one, what shape will it take? Fortune's Anne Sraders details what needs to happen for the U.S. economy to reach pre-COVID levels.

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