Economic Insights - October/November 2020

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What is the outlook for the economy?  We’ll give you the insights and analysis you need to make better decisions, so you can make better profits.

As we enter the last few weeks of 2020, we can report that this has been a tumultuous year as well as a rewarding one.  Despite the COVID19 crash which bottomed March 23, the S&P 500 has generated a total year-to-date return of roughly 12 percent, while the Business Briefings editors earned nearly 52 percent over the same period with our PARE-5strategy.

The third-quarter earnings season has far exceeded expectations, but the positive future guidance market seems to be a bigger factor for investors. Ultimately, until the COVID19 is fully curtailed, the Info-Tech, Communication Services, Health Care, and Consumer Discretionary sectors will lead given their favorable earnings and sales growth related to the economic recovery.

Companies are raising guidance at an extraordinary rate in this quarter. Despite the recent COVID spikes, CEOs seem to be confident in their forecasts.  Anyone who doesn’t have these statistics at their disposal is flying blind. 

There is still some political uncertainty. The government seems almost certain to be divided.  In terms of the presidential race, Biden has been declared the winner by the media, but there will be “challenges” to state results and the electoral college count will wait until that process plays out.

As of today, the GOP is the slight favorite to hold on to the Senate.  It has secured 50 Senate seats.  Both Georgia seats will be involved in a runoff on January 5th as neither candidate secured the 50 percent threshold needed to capture the seat.

A 50/50 Senate tie would mean the tiebreaker falls to the vice president. That scenario suggests no one will have a clear or strong majority.  So, it seems doubtful that any market negative radical changes will get passed as there exist a few moderates like Manchin and Collins on both sides of the aisle who will keep the equilibrium in place.

Democrats are certain to hang on to the House for now but they will be working with the smallest majority since World War II.   So, once again sweeping radical legislation is apt to be kept in check.  This probably...

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