- Scott Poore, AIF, AWMA, APMA
Finally, Some Fundamentals To Digest
Investors will finally get to focus on the fundamentals this week, hopefully. One of the indicators that a recession is over is when GDP turns positive after two consecutive negative quarters. According to the Atlanta Fed's GDPNow estimate, 4th quarter GDP looks to come in at +7.5%, which will officially mark the end of the recession that resulted from the March 2020 shutdowns. In addition, so far, corporate earnings have not disappointed. S&P 500 companies are beating earnings estimates by 86% and this week features releases by some tech giants (Apple, Facebook, & Microsoft), airlines (Southwest & American), and a vaccine developer (Johnson & Johnson). We will also find out a lot about the state of the consumer this week, with economic releases on Personal Income, Consumer Spending, Consumer Sentiment, and Consumer Confidence. If all goes well, this should provide the backbone for higher equities going forward.
The news on the virus was very encouraging over the weekend. The positive rate of daily COVID tests has plummeted in just over two weeks from 13.7% daily to 9.2%, as of yesterday. The 7-day average of daily cases has now dropped below the previous low of Dec 28th last year. Hospitalizations are down 14.2% from the January 7th peak. This is the first considerable decline in hospitalizations since the low of Sept 23rd of last year. According to the FDA, two new vaccines - one from Johnson & Johnson and one from Astrazeneca - are finalizing their trial data to present to the FDA for approval. Of significance is the vaccine by Johnson & Johnson, as it will require only 1 shot and early studies have shown it had 90% efficacy. FDA approval will help speed up the vaccination process with a medicine that only requires 1 dose. On top of that good news is the revelation that CA governor Newsome is expected to lift the state-wide lockdown soon.
Positive fundamentals, improving virus numbers, and greater economic activity from areas previously on lockdown spell good fortunes for equity investors in the near future.
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