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The Week Ahead - Earnings Season Surprises

by , 21 October 2020
The Week Ahead - Earnings Season Surprises
Market sentiment has improved since President Trump's release from hospital, and we head into third quarter (Q3) earnings season.

Analyst forecasts on the S&P500 (a gauge for global equity markets) signals a potential decline of 20.5% for Q3, this would be the second largest Q3 decline since 2009.

Analysts expect a decline in earnings in the fourth quarter of 11.8%, and a return to earnings growth in the first quarter of 2021 of 14.1%.

The 12-month forward PE ratio of 22 is above both the five-year and 10-year average for the S&P 500.

Any positive surprises should see global markets consolidate before pushing higher into year end.

Most investors ignore the fact that 35% of the S&P 500's earnings are from outside of the US so earnings season in the US is important.

 
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Seasonal Returns signal potential Rally
 
Seasonality data over the past twenty years for the S&P500 highlights how the market continues to push higher into year end. See the below seasonal chart showing average cumulative returns.
 
 
 
Open Trade: Long the USD/ZAR
 
Our long on the Rand is still open, adjust your stoploss to R16.3995 and trail it higher as it breaks through R16.60, R16.80 and R16.90 towards our target of R17.00.
 
Make sure to trade an appropriate size position for your portfolio.
 
NOTE: Investors looking to externalise funds should do so now after the strong pull back in the USD/ZAR.
   
See you next week.
   
Gavin McCarter,
Contributing Editor, Money Morning


The Week Ahead - Earnings Season Surprises
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