While not quite going up in a straight line, stocks have performed well since the middle portion of last week. In a bit of a recurring theme, investors remain optimistic that some form of fiscal stimulus will get passed by Congress – maybe even before election day. The question remains whether this investor optimism is misguided as Democrats and Republicans continue to vehemently disagree on the size and scope of a potential stimulus package.
From an earnings perspective, a number of large banks reported results this week and, in general, the good outweighed the bad. The biggest surprise was that banks set aside fewer provisions for potential loan losses than expected, indicating banks do not anticipate a high number of loan defaults. Both consumers and corporations appear to be showing encouraging signs that they are still paying down debts, even in the face of a less-than-robust economy. Additionally, notable revenue growth was seen from banks with a strong bond trading presence.
While banks appear to be performing relatively well, airlines continue to struggle. For example, Delta Air Lines reported a multi-billion-dollar loss during its earnings call this week. While leisure travel demand has improved from the depths of the pandemic lows, business and international travel remains tepid at best as various restrictions and work-from-home policies remain in place. If these trends do not improve, airlines may need a further stimulus injection from the U.S. government.
Lastly, Walt Disney announced this week that it was restructuring its business to, in essence, prioritize its streaming service over theatrical releases. With foot traffic at movie theaters still at historic lows, large movie studios such as Disney are in a bind as how to best distribute their content to consumers. Like many potential post-pandemic outcomes, it remains to be seen whether Disney’s directional change will be a temporary adjustment or a permanent change to their business model.
Stay safe and be well.
Market comments based on the S&P 500, Dow Jones Industrial Average and NASDAQ Composite indexes which are unmanaged and cannot be directly invested into.
The information provided, including references to individual companies is for general informational and educational purposes only and is not a recommendation of any kind or investment advice.
Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time and cannot be guaranteed.
Past performance is no guarantee of future results. Investing involves risk and the potential to lose principal.
October 15 Weekly Market Update
October 16, 2020