Political Bickering Delays Next Stimulus

Most of the 2nd quarter corporate earnings are now on the books and the overwhelming majority, about 80%, have handily beaten estimates. It was certainly a low bar, with consensus at down -44% over last year. Analysts were flying blind as most corporations, in the face of the pandemic, withdrew previous earnings guidance, leading to the largest gulf in history between high and low estimates. With a few exceptions, earnings have been coming in at the higher end of that historic gap.

While good corporate earnings have undoubtedly helped the market, on the other side, our government seems to be sinking it. The market sold off at the end of last week as political bickering has led to a delay in the next coronavirus relief stimulus package. While it is likely that we will see something given that it is an election year and voter go to the polls in about three months, the shape and size is very much in question. Look for the market to stumble if our parties continue to play chicken with the next relief bill.

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