Earnings...Earnings...Earnings

as the mantra goes...We kick off into the earning season tomorrow with the big banks.  Wells Fargo, J.P. Morgan, etc.  After that, we have Netflix on Thursday with their earnings report.  Over the next couple of weeks, we get a glimpse into the earnings for all publicly traded corporations.  Because of the dismal economy landscape, analysts have already lower-earning estimates for this upcoming quarter.  What does that mean?  Well, if we start seeing a majority of companies beat their estimates, it will most likely be because the bar has been lowered.

With that in mind, let's take a look at the current economic layout as supplied by BullGap's Recession Index.

Long-Leading Indicators

The screenshot below shows that the impact of the Federal Reserve QE policy.  It has flooded the market with liquidity.  Because of this, credit is at its all-time lows.  This has an effect of allowing companies to continue to borrow at at such a low rate.  Corporate profits however has just fallen off the cliff.

Leading Indicators

Several of the leading component indicators that make up BullGap's Index are showing signs of "recovery".  After a lock-down that disrupted the economy, there is a turn-around in consumer durable goods and new orders for capital goods.  Housing Permits for 1-unit is ticking higher and total weekly hours for production is on the rise.

All the data points to the re-opening of the economy. However, if you look at it from pre-COVID heights, there is a long way to go before we see true meaningful growth.

Coincidental Indicators

The coincidental indicators for personal income, all employees total, industrial production have also seen an uptick with the re-opening of the economy.

Clearly the above data showcases an upward trend in several key components for the economy.  Unfortunately, there is a long way to go to get back to pre-pandemic levels.  And with recent events of spikes in COVID-19 causing re-closure, the damage to the economy will not be known until some time later in the future.

Treasury Market movement

Now looking at the market, there has been a movement to a defensive posture for investors.  Looking at our Daily Market review on MogulUp, we can see the treasury market is moving up.  The screenshot below is a snapshot of July 13, 2020, and TLT has already provided over 21 percent return to date.  Though the Treasury market is in an overall downtrend, there has been a recent rally.

Since June 11, TLT has been making a rally to the upside.  Other than the Nasdaq 100, the V-shape market rally has been in consolidation and this move to Treasury can be seen as a defensive position.  With the rise in COVID-19 cases and re-closure in some states, it's probably telling that investors are seeing the slowdown and taking up this position.