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Weekly Market Recap: July 13, 2020

The week in review

  • Markit/ISM non-mfg. index at 47.9/57.1
  • Jobless claims at 1.314M
  • PPI/Core PPI at -0.8% y/y / 0.1% y/y

The week ahead

  • Retail sales, consumer sentiment
  • Industrial production, CPI, housing starts
  • NY & Philly Fed mfg. surveys

Thought of the week

The 2Q20 earnings season kicks off this week and the outlook is particularly bleak. With a handful of early reports in the door (4.2% of market cap), we currently expect 2Q20 S&P 500 earnings per share (EPS) to come in at $21.86, a -45.5% contraction from a year ago. From a sector standpoint, those names that were under pressure in the first quarter are expected to continue to struggle. Specifically, the energy and consumer discretionary sectors are expected to see earnings turn negative, which will weigh on the performance of the index in aggregate.

Additionally, financials are expected to see earnings fall -58.4% year-over-year, but there is additional downside risk to this number given the rising risk of further increases in loan loss provisions. Although no sector is expected to see positive earnings growth this quarter, utilities, health care and technology should hold up well on a relative basis, and are expected to see EPS grow -0.2%, 0.0% and -7.7% year-over-year, respectively.

That said, this large contraction in 2Q20 EPS is not a surprise, and investors should focus on guidance, whether qualitative or numerical, in order to gauge how efficiently companies can perform in a partially opened economy. Overall, we continue to prefer quality companies with high margins and low leverage, but are growing more comfortable embracing some of the cyclical sectors as the economy gradually comes back online.

2Q earnings calendar 2020: % of market cap reporting

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Past performance does not guarantee future results.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

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The price of equity securities may rise or fall because of changes in the broad market or changes in a company’s financial condition, sometimes rapidly or unpredictably. International investing involves a greater degree of risk and increased volatility. There is no guarantee that companies that can issue dividends will declare, continue to pay, or increase dividends. Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage.

JPMorgan Distribution Services, Inc., member of FINRA.

J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset Management, Inc. and JPMorgan Asset Management (Canada) Inc.

©JPMorgan Chase & Co., July 2020

Unless otherwise stated, all data is as of July 13, 2020 or as of most recently available.

Disclosure: J.P. Morgan

Past performance does not guarantee future results.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

The price of equity securities may rise or fall because of changes in the broad market or changes in a company’s financial condition, sometimes rapidly or unpredictably. International investing involves a greater degree of risk and increased volatility. There is no guarantee that companies that can issue dividends will declare, continue to pay, or increase dividends. Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage.

JPMorgan Distribution Services, Inc., member of FINRA.

J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset Management, Inc. and JPMorgan Asset Management (Canada) Inc.

 

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