President Donald Trump’s positive COVID-19 diagnosis doesn’t change the market’s conviction in two things: There will be another federal stimulus bill, and corporate profits are recovering.
The conviction in one of those is more well-grounded than the other. Yet, it’s the faith in the other that may be tested in the week ahead without meaningful evidence of progress.
The bulk of corporate earnings season still is a few weeks out. Confidence is high the third quarter was not the mess business experienced in the springtime. Sure, the pandemic continues, re-openings, shutdowns and re-openings added to the already-volatile environment for companies to eke out profits. Fewer companies have ventured public guidance for their third-quarter results, but confidence has been growing that S&P 500 companies will report a smaller drop in profits compared to a year ago than they did in the second quarter.
What’s less certain, and more pressing for investors in the week ahead, is the fate of another stimulus plan. House Democrats, Senate Republicans and the Trump administration have been talking on and off for weeks regarding more federal spending to help underpin the pandemic economy. How the president’s positive COVID-19 status affects those talks remains to be seen.
Market confidence in Congress to find a compromise is measured moment-to-moment during trading hours. Faith and skepticism are actively priced on every word and whim from those negotiating a package.
House members are back home in their districts after passing a $2.2 trillion Democratic plan. They are on-call to return to the Hill if there’s a deal with the Senate. Senators are gearing up for Supreme Court nominee hearings beginning next week. Voters already are casting ballots as Election Day nears. Big layoffs have been announced by airlines and Disney. And now the president and the first lady have the coronavirus.
The parties are trying to hammer out a compromise of how, and how much, to help out-of-work Americans, whether or not to provide money to local governments, and more financial assistance to small businesses.
A looming deadline, and presidential diagnosis, may help focus negotiating efforts. A market drop, though, will demand a deal.
Tom Hudson hosts “The Sunshine Economy” on WLRN-FM, where he is the vice president of news. Twitter: @HudsonsView