Now that the earnings season is almost over, it is time for investors to digest the broadly expected disappointing results. Whilst the stock market has recently shaped a “V” recovery from the March bottom, as we anticipated in our previous article, fundamentals will likely be under the spotlight especially as increasing numbers of big investor “gurus” from Warren Buffet to David Tepper and Mark Cuban have came out with the “Market Is Overvalued” sentence. Well, you do not need to be a billionaire or lead a big hedge fund to understand that a circa 22x PE multiple on the SPX is not a sustainable investment choice for quality business/fundamentally driven investors.

Despite WTI Oil continues with its historically sharpest rally, energy and Oil & Gas names all still struggle. Gold and Gold Miners seem to have gained positive momentum as Central Banks reputations start to fade away. Overall speaking, the stock market has been trading within a pretty wide range (SPX between 2650 and 2850) over the past few weeks, as market participants are still uncertain of future outcomes. The situation is getting frustrating also due to the lack of companies’ guidance and UK & US lockdown postponement. The global economy might still be frozen for the next 3 or 4 months, and the reality is that even in countries like Spain, Germany and Italy, people are not really back to normal, but they are “only” allowed to spend some time outdoors. The hospitality sector is still struggling, and the restaurant sector can only operate as a takeaway service.

Copper, the main barometer for stocks, has also been hammered this week. “Vol is back” should be the headline of the week, as the VIX index is back above 35 (from 26 last week) and stock market’s swings get deeper, even intraday. Sector-wise, financials are struggling as uncertainty around the full economic impact of the pandemic increases the likelihood of a negative interest rate scenario in the US (which is what US 10Y Treasuries have been “yelling” for a while).

The next catalysts to keep an eye on are potential second wave of infection in countries where the lockdown has already been lifted, fiscal stimulus, potential escalation on trade dispute and the Germany vs EU/ECB dispute.

Next week our macro spotlight will be on?

Monday:

• GDP Growth – Japan 
• Housing Market Index - US 

Tuesday:

• Industrial Production – Japan 
• Unemployment Rate – UK 
• ZEW Economic Sentiment – Ger 
• Housing Starts – US 
• Retail Sales – US 

Wednesday:

• Machinery Orders – Japan 
• RPI – UK 
• Inflation Rate – Eurozone 
• Oil Data – US 
• FOMC Meeting – US 

Thursday:

• Markit Manufacturing PMI – UK, US 
• Jobless Claims – US 

Friday:

• Markit Manufacturing PMI – Fr, Ger, Eurozone 

Chart of the week

Tweet of the week

“So everybody is clear: The Fed has increased its balance sheet by $3.174 trillion since last August.

That's an 84% increase in 9 months.” 

Sven Henrich

Fact of the week

German stats office says Q2 forecasts are for an around -10% GDP decline