by Adam Hamilton
The US stock-market action last quarter was dumbfounding. Big US stocks rocketed higher despite this global pandemic ravaging the US economy, which collapsed by a third in annualized terms! That makes understanding their fundamentals more important than ever. The winding-down Q2’20 earnings season reveals whether those massive stock-price gains were actually justified by underlying corporate profits.
Last quarter proved this country’s worst in history economically, with US GDP crashing at a brutal 32.9% full-year pace! 3/4ths of that plummeting was driven by personal consumption cratering. Tens of millions of Americans were receiving unemployment payments. When spending wanes, corporate earnings have to follow. Consumer spending dominates the US economy, driving about 7/10ths of all economic activity.