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Trick-or-Treat? October offers treats to investors this year
By: Edward Jones
What drove this solid October performance?
1. Reopening 2.0 – COVID-19 trends improving, not only in the U.S., but globally: After battling the delta variant for much of the past few months, the US and many global economies finally seem to be at an inflection point, with better COVID-19 trends overall – at least for now. According to data by the CDC, cases and deaths in the U.S. have come down to numbers last seen in July of this year, prior to the delta variant surge. In addition, vaccination rates have improved, with 69% of the country over the age of 18 fully vaccinated (with the ongoing approval of boosters and vaccinations for children supporting these trends).
2. Third quarter earnings are exceeding expectations so far: Despite some high-profile companies, including Amazon, Apple and Starbucks, missing earnings forecasts – largely driven by supply chain bottlenecks and labor shortages – third quarter earnings have overall been a pleasant surprise to the upside. With about 55% of S&P 500 companies having reported so far, third quarter earnings growth is up a robust 36% year-on-year, well ahead of the expectation for 28% growth predicted at the end of September1. This upward revision in earnings has broadly supported the positive market tone.
3. President Biden's new social spending framework – is a corporate tax hike off the table? Last week, President Biden officially unveiled a ~$1.75 trillion social spending framework, which included spending on areas like universal pre-K, childcare support and an extension of the child tax credit, as well as over $500 billion on climate initiatives. While the proposal has not been endorsed by all factions of the Democratic party, policy makers are looking to get the bill passed in the weeks ahead, along with a vote on the $1.2 trillion infrastructure package in the House.
Sources: 1. Bloomberg
Edward Jones - Mae Luchetti