What we’re reading (10/11)
“Investors Are Betting Corporate Earnings Have Turned A Corner” (Wall Street Journal). “Investors are entering third-quarter earnings season with brighter expectations for corporate profits, a bet they hope will propel the next leg of the stock market’s rally. Profits among companies in the S&P 500 are still expected to decline sharply from last year, but analysts have been lifting their estimates over the course of the quarter—a move that goes against the norm. Typically, earnings expectations decline as a quarter progresses.”
“HSBC Calls Start Of A ‘Great Rebalancing’ As The Global Economy Enters A Flatter Stage Of The Recovery” (CNBC). “A ‘great rebalancing’ of investor portfolios away from core government bonds and a ‘coupon clipping environment’ for markets are coming into view in the fourth quarter, according to HSBC Global Asset Management. In its quarterly outlook report, HSBC characterizes the global economy as entering the second, flatter, phase of a two-stage ‘swoosh-shaped’ recovery in which growth is set to moderate.”
“The Baby Boomer Bond Dilemma” (New York Times). “Today’s record low bond yields could not come at a worse time for many baby boomers. Owning U.S. Treasuries, the undisputed safest bond for retirees, means signing on for next to nothing in earnings for the next five to 10 years. That’s because the current yield of a Treasury bond is a solid estimate of future annual returns, and Treasuries that mature in 10 years or less currently have yields below 1 percent.”
“The US-China Trade War And Global Value Chains” (University of Minnesota). Interesting new paper from Yang Zhou at the University of Minnesota finding that “the [Trump] trade war costs China $35.2 billion, or 0.29% GDP, costs US $15.6 billion, or 0.08% GDP, and benefits Vietnam by $402.8 million, or 0.18% GDP.” According to Tyler Cowen at George Mason University, “[t]hose numbers should not come as a surprise, they do indicate that both countries are worse off, but they also show that a lot of the bargaining power does in fact reside on the side of the United States.”
“‘I’m Terrified, Frankly.’ Meet The People Who Are Counting On Another Stimulus Bill” (MarketWatch). “Most of the stimulus checks have long been disbursed and the supplemental federal benefits ended in July. Extra $300 unemployment benefits from the Federal Emergency Management Agency recently ended too. The September jobless rate was 7.9%. That’s off the double-digit rates of the spring after the pandemic’s initial shockwave. But September marked the smallest gain in employment since state economies started reopening; 700,000 people left the workforce because jobs are scarce.”
