Q2 2020: A Study in Persistent Bullishness

Published 06/30/2020, 05:34 AM
Updated 07/09/2023, 06:31 AM
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Closing out the month of June, the calendar Q2 and first half 2020 today, market indexes once again saw bulls charging through the bell. Reassuring, if vague, words from both Fed Chair Jay Powell and Treasury Secretary Steven Mnuchin on Capitol Hill steered clear of any painful reckoning regarding the coronavirus pandemic. Indexes, coming off a severe selling-off period at the end of Q1 (March), are now clocking their best quarters in a long time — in the S&P 500’s case, since 1998.

For sure, the second half of calendar 2020 has its work cut out for it to keep bullish sentiment fresh. There are still plenty of challenges — coronavirus, subsequent economic fallout — and unknowns — the November election, a treatment and/or vaccine for COVID-19, a trade deal with China — in the months ahead. For now, investors are looking on the bright side of all of it. Though as we saw at the end of Q1, when sell-offs do occur in today’s market, they can be swift and cruel.

Logistics and delivery giant FedEx FDX shares shot up 8% in after-hours trading following a big beat on both top and bottom lines in its fiscal Q4 results: $2.53 per share was well ahead of the $1.42 per share expected (though still down nearly 50% from year-ago earnings), on quarterly sales of $17.4 billion which left the $16.12 billion Zacks consensus in the dust. This is the first positive earnings surprise for FedEx in the past four quarters.

Even with $125 million in added costs due to COVID-19 in the quarter, FedEx managed to turn its results around in a big way this quarter. The company also posted full-year earnings of $9.50 per share — nearly a full dollar ahead of expectations — on $69.2 billion in revenues, far surpassing the $68.00 billion our analysts were looking for. FedEx has provided no earnings or revenue guidance for fiscal 2021 at this time, citing unknown obstacles related to the ongoing pandemic.

While both Secretary Mnuchin and Fed Chair Powell were open to the idea of extending emergency lending facilities, in addition to other tools to help bolster the U.S. economy going forward, high unemployment and a potential second wave of COVID could through a wrench into operations. Further, NIHS Head Dr. Anthony Fauci — the federal government’s foremost authority on infectious diseases — said he envisions a scenario where the U.S. is reporting 100K new cases of COVID-19 per day. This would occur if preventative measures like mask-wearing and social distancing are not utilized. Currently, the U.S. has over 2.6 million confirmed cases of the coronavirus, with more than 128K fatalities.

This is hardly the stuff to hang one’s hat on the best trading quarter in 22 years, but it does illustrate how far out of the hole the markets have dug themselves to this point. New jobs data consumes the rest of this holiday-shortened week, with Q2 earnings season hitting the accelerator in the coming weeks. Should company results prove better than expected, we may continue to see the bulls break through new barriers.

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