The worst week since March

Earnings and things 

This week, the market tried to digest rising COVID-19 cases and worries of large-scale shutdowns (like we’re seeing across Europe), additional stimulus talks falling apart, and of course preparations for election day while going through one of the busiest weeks for earnings. Apple reported a 20% decline in iPhone sales while Twitter and Facebook reported lower active users (honestly not surprising, the political content is getting overwhelming). Unsurprisingly, these stocks all slid after reporting results. It almost seemed habitual because even though Amazon knocked it out of the park, the stock still fell over 5% on its report. Google’s parent company, Alphabet, was the only name that managed to escape the trend and rose on its fantastic results for the quarter. 

Moral of the story: Shocking zero people, trying to work through all of this (mostly not optimistic information) at once did not go well and stocks posted their worst one-week sell-off since March. I have a feeling this coming week isn’t going to be much different – even once we get through election day, it’s likely going to take a few more days to count all the mail-in and absentee ballots. In the meanwhile, earnings will continue rolling through and COVID-19 case counts will continue to likely rise. Buckle up.  

The comeback kid

Coming off the worst decline in the second quarter, US GDP increased by a record 33.1% for the third quarter. Remember this number is the percentage by which 2Q21 GDP would be below 2Q20 GDP if GDP were to decline in the next three quarters at the same rate as it did in 3Q20. In the business world, we’d be looking at the relationship between GDP in 3Q20 vs 3Q19, which actually only fell about 2%, which is astounding all things considered. The biggest contributor to GDP was consumer spending, which increased by a 40.7% annual pace – almost twice the previous record set during the recovery after WWII. 

Moral of the story: The rebound of the economy during the third quarter is great to see and it reversed a lot of the damage caused by the pandemic lock-downs during the second quarter. However, at least 11m people who lost their jobs during the pandemic are still unemployed and the recent spikes in COVID-19 cases could reverse some of the progress so it’s hard to get too optimistic just yet. 

Losing confidence

Consumer confidence fell in October, indicating lower optimism about the job market and the economy over the next six months given the rising levels of COVID-19 cases. Fewer consumers believed the economy would be better in six months aka more felt it would be worse. Though consumer confidence has increased since the depths of the pandemic lockdowns, the index, which came in at 100.3 for October, is still far below pre-COVID levels above 132.

Moral of the story: The data for the survey were collected before the recent sharp uptick in cases we’ve seen over the last week or so, which probably means even lower numbers are coming in November. 

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