Washington, D.C. kicked the can on the debt ceiling, but what matters more for investors is earnings. This week on the latest LPL Market Signals podcast, LPL Financial Strategists Jeff Buchbinder and Ryan Detrick discuss how worried investors should or shouldn’t be about Washington, D.C. drama and recommend focusing more on the upcoming earnings season (which could have trouble matching previous quarters). Lastly, they discuss some mixed economic data and what it all means for the economy going forward.
Kick the can
Congress arrived at a bipartisan deal last week to raise the debt ceiling to cover government debt obligations until December 3, kicking the can down the road as expected. Ryan and Jeff discuss why this is actually perfectly normal—this is the 79th time Congress postponed addressing government obligations since 1960. The bottom line is—the delay was necessary to stave off a default and we likely will see number 80 sometime soon.
Earnings season is here
It is time for third-quarter earnings season—which Jeff thinks there is potential for more than 30% earnings growth. After a record 90% growth last quarter, 30% would still be a very solid number. But the upside surprises will likely be smaller and more in-line with history. The truth is—supply chain and labor issues could make things much harder on corporate America this time around.
Jobs missed big
The September jobs report came in at only 194,000 jobs versus expectations of close to 500,000. Ryan points out that August was revised upwards of 131,000, which helped the overall picture. Still, this was a disappointment all around. Jeff states that he still expects a big jump in jobs before the end of the year. The other thing that caught their attention was the 10-Year Yield didn’t sell off on this news. If it was a true risk-off scenario, they’d expect more move to defensive areas, but that wasn’t the case. Recent manufacturing and services data remain strong, with various risk-on indicators still flashing confidence in the economy.
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