The Week Ahead: Investors confident about 2021
Investors keep scaling the wall of worry.
Sure, there have been trips and slips, but investors are confident 2021 is a strong anchor to take risk now. That anchor begins to be tested in the week ahead.
Hundreds of companies are due to report quarterly results. Proctor and Gamble, Netflix, Verizon, Tesla and Coca-cola will be among those firms facing their financial grades this week. Overall, earnings for S&P 500 companies will be bad, but not nearly as awful as the second quarter. Profits are expected to be down more than 20% compared to a year ago. In this coronavirus-infected economy, that’s seen as a win.
But that’s not what longterm investors will focus on. Neither are they too bothered by the lack of another economic stimulus package from the federal government, rising COVID-19 infection rates in many parts of the country or uncertainty over the election as votes are cast. If those unknowns were cause for anxiety, one would see it reflected in stock market prices.
And here’s where the no problem attitude may be a problem. A steady stream of optimism is the rope allowing investor confidence to climb. This week, profit outlooks will test the strength of that tether. Despite the economic and political uncertainty, investors expect profits to pop in
2021. Easy comparisons to the sharp recession this year help. So will the costcutting companies have been forced to do this year. Buyers bought into that forecast over the past many weeks. Stock valuations already are more than 30% above their decade average.
Investors hope to continue their climb as the markets face a mountain of third-quarter results beginning in the week ahead.