Weighing The Week Ahead: Will Strong Earnings Confirm An Economic Rebound?

We have a light economic calendar with a focus on housing. There are continuing political and pandemic stories that could dominate the news cycle at any time. For those focused on financial markets, earnings season might provide answers to important questions. We will all be asking: Will earnings signal a strong economic rebound?

Last Week Summary

In my last installment of WTWA, I asked whether the President’s COVID diagnosis should cause investors to change course. There were some reader complaints that this topic was “political.” As always, I tried to explain that political events determine policies which affect our investments, but the distinction seems to elude those who disagree with the conclusions. It is my mission to highlight everything important for investors, even if the subject is awkward.

Most agreed with me since it was a popular topic in the financial media.

Key Charts

I always start my personal review of the week by looking at some great charts. This provides a foundation for considering news and events. Whether or not we agree with Mr. Market, it is wise to know his current mood.

Market Story

This week I am featuring Investing.com’s futures chart. I like this version since it provides a glimpse of overnight action. If you visit the site, you can see the news behind the indicators.

Sector Trends

Sector movement is another important clue to market trends.

Once again, Juan Luque provides us with some words of wisdom from the Incline trading desk:

The S&P ended the week on the rise after being in the red territory briefly on Wednesday. The Consumer Discretionary and Information Technology led the performance being up over 2% each despite being in the weakening quadrant. The Consumer Staples sector was up and continued its move along the improving quadrant, while Real Estate declined and moved backwards in the quadrant. The Health Care and Energy sectors continue in a downtrend both being down on the week with no signs of improvement both shown in red arrows. The Industrials sector remains the strongest one overall as it remains green in the leading quadrant.

Here is a bit more detail at the industry level.

Comment

The “official” market range was a bit smaller than the chart suggests since we only consider movement during normal trading hours. The market gained 0.2% for the week with a trading range of only 3.2%. This is pretty quiet action, as you can see from the volatility summary in my Indicator Snapshot, featured in the Quant Corner.

Personal Note

As regular readers will notice, I have made some changes in both format and content for WTWA. I am focusing on the most important good and bad news rather than attempting an exhaustive compilation. I am adding my own summary of the current economy. My goal is to make the news section more valuable and easier to read while leaving out less important news. My focus on the best charts and sources is unchanged. The overall article will be shorter but will include (I hope) your favorite segments.

I am emphasizing evidence that readers can evaluate readily. If I have done my job well, you will find charts and data that help you reach your own conclusion, all organized in a logical sequence.

I welcome comments and suggestions about these changes.

Noteworthy

The Visual Capitalist provides an interesting analysis of advertising spending, including this angle:

Interestingly, changes in advertising spend tend to fall closely in step with broader economic growth. In fact, for every 1% increase in U.S. GDP, there is a 4.4% rise of advertising that occurs in tandem.

The same phenomenon can be seen among the biggest advertising spenders in the country. Since 2000, spend has seen both promising growth, and drastic declines. Unsurprisingly, the Great Recession resulted in the largest drop in spend ever recorded, and now it looks as though history may be repeating itself.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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