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What A Mixed Bag Of Earnings And Economic Data Mean For You This Week

In the last several weeks I showed you the various health, economic, and investment impacts Covid is having on the entire economy… And more importantly what this means for you and your retirement portfolio.

Last week major corporate earnings including from the following giants came out…

  • Amazon
  • Alphabet – Google
  • PayPal
  • Exxon Mobil
  • Qualcomm
  • UPS
  • And more

Amazon had its first ever $100 billion quarter.

Google earnings rose 45%.

PayPal payment volume rose 39%.

Exxon had a gigantic $20 billion quarterly loss.

Qualcomm missed revenue and earnings expectations due to “supply constraints.”

And UPS posted a $3 billion quarterly loss – even though revenues grew by 21%.

Unlike last week where almost all large companies reported spectacular earnings… This week was more of a mixed bag.

As I said last week…

Corporate earnings being great is a huge positive sign for the economy going forward.  Especially because it contradicts the negative unemployment and economic data I talked about last week.

Because this week things were more mixed, it’s not a great sign either way of the direction of the economic recovery.

Which was proved out with the release of US unemployment and other economic data.

Weekly jobless claims were 779,000 which is down from the 900,000 + from the last few weeks… But it’s still at record levels compared to the pre pandemic period.

17.8 million Americans are still claiming some form of unemployment benefits.

The “official” unemployment rate is now down to 6.3% from a high of 14.8% in April 2020.  Which again is great, but it’s still at levels we haven’t seen since May 2014 as the US continued its slow recovery from the Financial Crisis.

And the unofficial – true – unemployment rate is still in the 10% range.  I call this the true unemployment rate because this includes people who have stopped looking for work… While the “official” unemployment rate doesn’t count these people.

This is all a mixed bag of information on the direction of the recovery…

One thing that was horrific though that not many are talking about is the $678.7 billion trade deficit for the full year 2020.

This is the worst trade deficit since 2008 during the height of the Financial Crisis.

What does this mean for you?

Think of the trade deficit as the US sent a net of $678.5 billion overseas last year… In other words, when considering all trade, the US lost $678.5 billion last year because it spent far more – imports and buying stuff – than it took in – exports or selling stuff.

This is a huge reason US GDP shrunk at a 3.5% rate last year – the largest fall in 75 years.

And yes, most of this was due to closures, lockdowns, and in general lower business overseas which lowered US exports – selling – to these countries.

Here’s what I said about this last week…

This was proved even more when the US government released full year 2020 GDP numbers that showed the US economy grew at its slowest rate since 1946 – 75 years ago.

How bad were things in 2020 for the US economy?

It shrunk at a 3.5% rate for the full year.

9.8 jobs are still gone.

And 23.8 million adults are struggling to feed their kids.

This is from the US economic data and The Washington Post.

This is bad enough…  But here’s what David Wilcox Senior Fellow of the Peterson Institute for International Economics and the former director of the domestic economics division of the Federal Reserve said about last year’s economic numbers.

“2020 has no precedent in modern economic history,” “The influenza of 1918 and 1919 predates our modern system of economic statistics, and since World War II, there’s never been a contraction that even remotely approached the severity and the breadth of the initial collapse in 2020.”

More context…  This is only the 14th year since 1944 that US economic output was negative.

The other times were during World War 2 and the immediate aftermath, 2 brief crashes in the 1950’s, the Stagflation era of the mid to late 1970s, the 1987 crash, and the financial crisis from 2007 and 2008.

That’s it in the entire modern history of the United States.

How bad were things for individual small business owners?  The National Restaurant Association estimates more than 110,000 restaurants closed their doors forever in 2020.

And this doesn’t include the so far unknown tens of thousands of other businesses that closed forever lats year.

Even worse news, with new Covid cases and deaths still exploding – yes I’m sure you’re tired of hearing me say this but it keeps happening every week – we’re still in ecnomic trouble going forward.

“There has been a broad recovery but, economically speaking, we’re not out of the woods yet,” said Ben Herzon, executive director at IHS Markit.

That remains true this week with earnings and economic data not showing a true direction either positively or negatively.

And that’s what I’m watching this week.  The continued direction of company earnings, unemployment, lockdowns, and how these effect the entire US economy and us all going forward.

You already know how to protect yourself from the virus… Here’s how I recommend you protect your retirement portfolio – because if the economy doesn’t get back on track soon… A major crash is coming soon.

If you’re looking for the best way to protect your portfolio as the economy hangs in the balance…

Make sure you’re in great stocks that have the following traits…

  • They’re cheap.
  • They have little to no debt compared to a lot of cash.
  • They produce large profits and cash flows.
  • And make sure they aren’t in industries that could be hammered by more closures.

To see some of those kinds of stocks that will help protect your retirement portfolio – Click the links below.

Use the following links to some of our recent articles to learn other ways to protect yourself and your investments in these uncertain times.

Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.

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