Don’t Let Election Fever Eclipse This Week’s Earnings Opportunities

Stock markets clearly just want to go up right now.

With FOMO (fear of missing out) being felt broadly, neither on-again and off-again stimulus talks, antitrust rumors, nor news about the upcoming election can keep markets down for long.

On that note, expect some more last-minute stimulus wrangling now that we have just over two weeks left until the election. We already saw some of that this weekend, as Pelosi gave a Tuesday deadline for stimulus talks, while Trump suggested he may want a stimulus bill that’s even bigger than the one Democrats have proposed.

That would be a hard sell in the Republican Senate. But this might be a last-minute hail Mary pass to narrow the pre-election polls.

And as hail Mary moves go, this would be a very good one for both the economy and the stock market.

Of course, Big Media is now completely focused on navel-gazing about the election. Over the weekend, almost everything seemed to be about last Thursday’s competing town hall events, and what Biden or Trump did better or worse.

What Big Media misses amid this obsession is that the economic picture is steadily improving. This week’s Reality Gap is that global indicators actually show continuing recovery and money flow.

China was the latest to release numbers. The country’s GDP for the third quarter was 4.9%. That’s on the low end of expectations (but still positive), and means that China’s economy grew 0.7% in the first nine months of the year.

That figure is bad, but given the chaos of the pandemic that started in China, not as bad as it could have been. Retail sales are still struggling to recover, however, as they’re down 7.2% in the first nine months of the year.

But again, a 7.2% drop in a year when China’s economy came to a standstill is impressively small. Shanghai’s stock market closed down on all this news, but futures are already up as the U.S. market is more optimistic.

And the wider market still has a lot of appetite for risk-on investments, as shown by the latest IPO news out of China. Rumor has it that Alibaba Group Holding Ltd.’s (BABA) financial spin-off Ant Group, which owns the Alipay payment service, used by one-third of China, has received approval for a $35 billion IPO.

That’s bigger than Saudi Aramco’s was, and would be the largest IPO ever. Ant Group would end up cross-listed in both Hong Kong and Shanghai.

Closer to home, last week’s upbeat bank earnings show the economy is recovering, even if bank stocks didn’t react well because the news was expected.

These positives – and especially stimulus hopes – are why the market is up early this morning despite the gloom that’s taken over Big Media.

And we may be seeing some more positive news in this week’s earnings.

Intel Corp. (INTC) has shown surprising strength over the past few weeks, despite being outcompeted by Advanced Micro Devices Inc. (AMD) and having to delay its move to the next generation 7 nanometer chips to next year (or beyond). Intel will be reporting its latest earnings on Thursday after markets close, and we’re going to get good or very bad news.

The good news would be Intel announcing that it’s been able to accelerate the timeline for the move to 7 nanometer chips, which would then make the company’s guidance for next year look not quite so bad.

The very bad news would be no accelerated timeline, making the guidance for next year pretty dire. Expect tepid results at best.

Netflix Inc. (NFLX) reports today after markets close, and has some really great numbers from last quarter to try to exceed. Last time I warned of a sell the news moment, and boy did it happen. The stock still hasn’t recovered completely.

This time around, don’t look for Netflix to crash and burn. Results will be good enough for the stock to stay near the top of the page, but not good enough to explode.

Also on the tech side, Tesla Inc. (TSLA) reports on Wednesday after markets close. Don’t expect any fireworks here, as CEO Elon Musk saves all his good announcements for other times.

Meanwhile, consumer staple giant Coca-Cola Co. (KO) will give its quarterly report on Thursday morning. Coca Cola’s perennial competitor PepsiCo Inc. (PEP) did so well last week that I’m expecting some good numbers from KO as well.

Great trading, stay safe out there and God bless you,

D.R. Barton, Jr.

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