Good morning. The global markets and U.S. futures are bouncing back on rising optimism that President Trump will be discharged from the hospital as soon as today. Investors are downplaying for now the confusing messages coming from Trump’s medical team on his condition.

Meanwhile, the global pandemic picture continues to worsen as cases top 35 million, and further restrictions are mulled, from Paris to New York.

Let’s see where investors are putting their money.

Markets update

Asia

• The major Asia indexes are mostly higher in afternoon trading, with Hong Kong’s Hang Seng up 1.3%.
• Shares of HSBC were up as much as 5% in Hong Kong this morning. Traders are warning of volatile spikes as put/call contracts soar to an 11-year high for the embattled lender.
• It’s been ten months since the U.S. and China signed the “Phase One” trade deal, and the results look pretty meager for America’s exporters. According to Fortune‘s Shawn Tully, “so far, the pact is delivering only about half the benefits the president promised.” 

Europe

• The European bourses were higher out of the gates with London, Paris and Frankfurt up 1% at the open, before falling.
• Brexit talks were thrown a lifeline over the weekend as Boris Johnson and European Commission President Ursula von der Leyen agreed to extend talks. But now France is objecting to any compromise on a key sticking point, fishing rights.
• Coronavirus cases continue to soar in Great Britain, France and Spain, forcing officials to plot elaborate new lockdown measures—including Paris restaurants—to keep the virus in check.

U.S.

• U.S. futures are pointing to a positive open, but are off their highs. That’s after Trump’s COVID diagnosis plunged the major exchanges into the red on Friday, with the Nasdaq off 2.2%. The pace of his recovery is likely to add to stocks volatility, at least for today.
• From the hospital this weekend, Trump issued an ALL CAPS tweet to restart talks around a stimulus package, and that’s giving the markets a bit of a lift. House Speaker Nancy Pelosi says the odds of an agreement are improving, but, as of Friday, the two sides were still hundreds of billions of dollars apart.
• Regeneron Pharmaceuticals shares were 3.7% higher in pre-market trading after news broke on Friday that Regeneron’s polyclonal antibody cocktail was part of Trump’s COVID treatment. Regeneron has yet to win COVID FDA approval for the treatment. Here’s why it was cleared for the president.

Elsewhere

• Gold is down, trading around $1,900/ounce.
• The dollar is flat.
• Crude is up, but Brent continues to trade in a range around $40/barrel.

***

The F-word

Fundamentals are shot. That’s the unmistakable conclusion to be drawn from the 2020 bull market rally.

In short, profits are down—way down, even. And stock prices are up. Way up. This dichotomy is throwing a key indicator, return on equity, into a funk, says Goldman Sachs.

“While valuations have expanded, fundamentals have collapsed; trailing 4-quarter S&P 500 return on equity (ROE) dropped by 150 bp to 14.9% in 2Q 2020 vs. 1Q 2020,” Goldman wrote in an investor note on Friday. “After reaching a peak of 18.6% in 1Q 2019, trailing 4-quarter S&P 500 ROE now ranks in the 45th percentile vs. the past 40 years.”

Here’s what that looks like:

The good news is that ROE hasn’t fallen by nearly as much as the plunge we saw a dozen years ago, during the global financial crisis. Still, that’s little comfort for those of you holding bank and energy stocks.

Meanwhile, in P/E terms, stocks are now trading 20 times earnings, up from an already elevated 16X at the start of the year. Such a reading would put valuations well within bubble range, markets historians say.

The great shrinkage of Corporate America’s top- and bottom lines is to blame for the collapse in fundamentals. That may sound obvious. But the component parts are still worth calling out. “Falling tax rates, lower interest expense, and rising leverage were insufficient to offset the large declines in margins and turnover,” Goldman writes. Here’s how they illustrate that collapse:

What does this mean for S&P full-year forecast? Goldman still sees the benchmark index around 3600, and that’s because ROE will bounce back in 2021, they say.

According to Goldman, we should see the S&P reach and then tick above the 2019 EPS level at some point around the second half of next year. But there are a few big assumptions baked into that forecast, namely, that we would see vaccine approval/distribution occur in the first half of 2021, and that the world’s biggest economies can successfully manage the escalating COVID outbreak in the meantime.

Those are not small ifs.

***

Have a nice day, everyone. I’ll see you here tomorrow. 

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

Today's reads

Imagine the electoral odds if there were no pandemic. Fortune's Geoff Colvin goes back in time to assess the huge impact the pandemic has had on Trump's re-election chances. As recently as March, Trump was a strong favorite as he could boast of impressive achievements in reducing poverty, increasing household income and closing the income inequality gap. The models gave him 55% of the popular vote. The models are calling him a big underdog these days. Leaving the models aside for a moment, it's fascinating to read just what a shock—down to the number—the pandemic has had on Trumpenomics and his quest for re-election. 

Revisiting "spygate." It was about a year ago that a spying scandal broke in Zurich involving a star banker and his former company, Credit Suisse. You probably remember what happened next. The story led to the downfall of Credit Suisse's Tidjane Thiam, the only Black CEO of a major international bank. The New York Times' Kate Kelly revisits Thiam's troubled time at the top. Despite his remarkable track record returning the bank to a profit, the Swiss "rejected him as an outsider," Kelly reports.

Energy woes. This next stat may not surprise those of you who are still long on energy stocks. The oil and gas sector has lost more than 100,000 jobs this year, according to a Deloitte study. With crude hovering around $40 this morning, job security continues to look fraught. 

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Market candy

Quote of the day

These increases are unsustainable, but prices will keep rising in double digits for another six months to a year.

That's Ed Pinto, director of the American Enterprise Institute (AEI) Housing Center and the former chief credit officer for Fannie Mae. As you can tell by his title, he's not talking about stock prices. He's talking about house prices. Fortune's Shawn Tully lays out the forces driving the housing market, and why the momentum will come to an abrupt end next year.