Q3 GDP came in up 33.1%, in line with the Atlanta Fed estimate from last month. That is an annualized number so we were up 8% for the quarter, cancelling the poor showing in Q2. Earnings came in better than the Factset estimate for Q3, down only 7% vs. 2019, but still a poor number. The trailing 12 month GAAP PE on the S&P rose again to 36, with the latest quarter being Q3 (92% of stocks reported). Factset projects earnings in Q4 to be 14% below the year prior quarter, still poor. There was almost no movement in the bond market over the month, and bonds are no alternative to stocks. The banks rallied again this month on the announcement of two viable COVID 19 vaccines, so there is an end in sight to mortgage forbearance.
But, the COVID virus fall wave continues to ramp up, cities and states are restricting peoples movement to slow the virus, and that will harm the recovery in Q4. The election is settled for all practical purposes.
The bull market continues, but the valuation is dangerously high and with COVID 19 on the rampage, a correction could be near.
