This sector could have a half million job openings and opportunities for older workers

Although the coronavirus continues to rattle global markets and industries, some analysts expect to see greater demand for advanced manufacturing talent in the U.S. as the pandemic diminishes. That could create opportunities for older men and women, including white-collar professionals struggling to find jobs.

Before COVID-19, there were 500,000 manufacturing jobs open in the U.S., according to the National Association of Manufacturers (NAM). “We’re going to have a need very quickly to ramp up on hiring in those facilities that may have been shut down during the crisis or that need to expand operations,” said NAM president and CEO Jay Timmons in a recent press conference.

“The fact that one can get a certificate in about nine months and totally re-career into a nearly guaranteed job is an incredible opportunity for an older worker.”

— Nora Duncan, Connecticut state director of AARP

As manufacturers frantically try to keep up again with demand for essentials and lifesaving PPE (Personal Protective Equipment) for health care workers as cases rise across the country, their innovation and high-tech problem-solving could help dispel misconceptions that all manufacturing jobs are dirty and physically demanding, said Sara Tracey, project manager of workforce services for the Ohio Manufacturers’ Association in Akron, Ohio.

Manufacturing jobs and what they pay

Entry-level manufacturing jobs in industries such as aerospace, technology and defense include CNC operators, set-up technicians and programmers, as well as inspectors, higher-end assembly technicians and quality assurance.

The pay typically ranges between $35,000 and $65,000, including overtime and benefits, said Richard DuPont, director of community and campus relations for the Advanced Manufacturing Technology Center at Housatonic Community College in Bridgeport, Conn. More experienced professionals can earn upward of $95,000.

80% of older Americans can’t afford to retire – COVID-19 isn’t helping

In Ohio, manufacturers have been training and moving some workers into higher positions so the companies can hire and train new candidates for vacated ones, Tracey noted. Resources such as the Making Ohio website let people explore careers in manufacturing, including robotics, automation and 3-D printing.

Industrial maintenance is an important career pathway these days, as well, Tracey said. This sector is expecting more retirements in the near future, which will create jobs from “traditional machine mechanics to troubleshooting state-of-the-art electronic or robotic processes,” Tracey noted.

Also see: Cannabis, whiskey, and mobile bike repair: These entrepreneurs are thriving in the pandemic

Connecticut, among other states, now offers training programs with community colleges, state manufacturers and other organizations.

From banking to precision tools

This kind of training helped Allison Clemens-Roberts, who is over 50, find work after losing her clerical job in the pensions department of a Connecticut bank in 2017. A severance package gave her time to look for work, but she couldn’t find even temporary employment. She blames age discrimination by white-collar employers.

“There’s no way to hide how old you are. They can ask when you graduated from school,” Clemens-Roberts said.

But while she was out of work, Clemens-Roberts received a postcard from AARP offering a 25% tuition scholarship on advanced manufacturing programs at Goodwin University, a career-focused school in East Hartford, Conn.

She wasn’t interested until her husband Frank saw a TV commercial touting the benefits of Goodwin’s manufacturing and other programs.

“He said, ‘Why don’t you think about changing careers?’” Clemens-Roberts recalled.

So, with several months left on her severance, she enrolled in a full-time, six-month CNC (Computer Numerical Control) Machining, Metrology and Manufacturing Technology certification program. It would prepare her for a job working with automated machine tools which requires mathematical skills, attention to detail and critical thinking.

SectorWatch: 80% of older Americans can’t afford to retire – COVID-19 isn’t helping

Scholarships cut Clemens-Roberts’ tuition bill from $7,000 to $3,200. After a two-month paid internship at TOMZ, a manufacturer of precision components for major medical devices in Berlin, Conn., she was hired in April 2019. Six months later, TOMZ reimbursed Clemens-Roberts $1,500 for her education tab.

Clemens-Roberts said her family is now in a better financial position than when she was working in a bank, living paycheck-to-paycheck. Considered an essential worker, she has kept her full-time job through the pandemic, except for three days in March.

“I never thought I would go to college and participate in a graduation — in cap and gown,” Clemens-Roberts said. “That was a big surprise. And [actor] Danny Glover was the speaker. A bucket-list experience.”

There’s “obviously age discrimination, among other things, at play” for job seekers over 50, said Nora Duncan, Connecticut state director of AARP. “The fact that one can get a certificate in about nine months and totally re-career into a nearly guaranteed job is an incredible opportunity for an older worker.”

While AARP helped Clemens-Roberts pay for the tuition initially, the internship helped her get hired as a machine operator.

Older and younger manufacturing workers helping each other

The search for skilled manufacturing labor across the country is creating opportunities for workers of all ages, said DuPont. And older and younger generations working together are assisting each other.

The older students help younger classmates with life skills, while younger students can help with technology,” said DuPont. “Together, they make excellent teams.”

Don’t miss: How will the robots see you through the pandemic?

Just ask Fernando Vega, 62, who is now a quality inspector at Forrest Machine, in Berlin, Conn. It makes precision-machined parts and other components for the aerospace and commercial industries. In the 1990s, he was a quality inspector before recessions and outsourcing forced him to consider other careers.

He tried working for a nonprofit and though Vega found the work rewarding, it wasn’t financially sustainable.

So, Vega went back to school in spring 2018 to study advanced manufacturing at Goodwin.

“I was in a class of 18, and at first everyone kept to themselves. But when it came time to read blueprints, there was some panic and I said, ‘Don’t panic, I’ll show you.’ The [younger] students helped me with trigonometry, and then we started to work together.”

Vega has worked at his manufacturing job throughout the pandemic. At one point, he was putting in 50 hours a week, but that was reduced to 40 hours plus overtime.

Vega recalled promising his mother that he would go to college. “But that was a long time ago,” he said. His mother never got to see him graduate but Vega feels he’s fulfilled his promise — not only to her, but also to himself. “I love my job,” he said.

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White House officials suggest breaking new coronavirus relief package into smaller pieces

White House officials on Sunday again suggested the best way to proceed with coronavirus relief is to split the Democratic $3.4 billion plan into pieces and pass some measures quickly while debate lingers on other items.

In an interview on ABC News’ “This Week,” White House Chief of Staff Mark Meadows said he thought Congress should pass unemployment insurance, aid to schools and liability protection for businesses.

“Perhaps we can put that forward, get that passed and we can negotiate on the rest of the bill,” he said.

Last week, Speaker of the House Nancy Pelosi repeatedly rejected doing the legislation in piecemeal fashion.

And interviewed on Sunday on CBS’ “Face the Nation,” Pelosi showed no sign of changing her mind.

One major priority for Democrats missing from Meadow’s package is more money for state and local governments.

“We have been ready for two months and ten days” to negotiate, Pelosi said, referring to when the Democrat plan passed the House.

With neither side showing signs of budging, it looks like the stimulus talks may drag on.

Republicans might be counting on pressure for lawmakers to act from the looming expiration of $600 weekly payment of enhanced federal unemployment benefits. These benefits, received by more than 20 million Americans, expire fully on July 31. No matter what Congress does, there is already likely to be a gap in those federal benefits given the delay in extending them.

But Pelosi could be counting on voters blaming Trump for any delay. She gave the president a new nickname, “Mr. Makes Matters Worse.”

Economists are worried the economy is losing steam in July after rebounding from the short but deep contraction in the second quarter.

They see more government aid to unemployed as essential to keep the economy from sliding into a double-dip recession

As it is, new layoffs continue to be announced daily, with billionaire Ray Dalio’s hedge-fund Bridgewater the latest to report job cuts late last week.

In an interview on Fox News Sunday, Treasury Secretary Steven Mnuchin confirmed the GOP package would reduce the blanket $600 weekly unemployment payment. Instead, the bonus would be tailored to workers’ income so they get about 70% of their take-home pay.

“We want to have something which is capable of about 70% wage replacement, which I think is a very fair level,” Mnuchin said.

Meadows and Mnuchin were on Capitol Hill on Saturday and will return Sunday to put the finishing touches on a Republican package to be unveiled on Monday.

Mnuchin said the GOP measure would cost $1 trillion.

“We can move very quickly with the Democrats on these issues. We’ve moved quickly before and I see no reason why we can’t move quickly again. And if there are issues that take longer, we’ll deal with those as well,” he added.

In a separate interview, White House economic adviser Larry Kudlow confirmed in an interview on CNN’s “State of the Union” that the GOP plan would include new $1,200 stimulus checks for Americans and would extend a federal moratorium on evictions.

Kudlow scoffed at suggestions the economy was weakening.

“The economy is improving by leaps and bounds,” Kudlow said.

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In apparent U-turn, Trump tweets photo of himself wearing a face mask: ‘Many people say that it is Patriotic to wear a face mask’

President Trump’s resolve may be cracking — at least when it comes to face masks.

On Monday, however, Trump tweeted

a photo of himself wearing a mask with a presidential seal, adding, “Many people say that it is Patriotic to wear a face mask when you can’t socially distance.” CNN

reported that the president’s falling poll numbers likely played a role in this decision to wear a mask, and hold a daily 5 p.m. update on the coronavirus pandemic.

On April 3, the Trump administration and the Centers for Disease Control and Prevention reversed their policies on face mask, and said all Americans should wear cloth face coverings and not — as it previously said — just medical workers. President Trump cited “recent studies” of asymptomatic transmission for the U-turn, while the CDC cited “new evidence.”

Unlike New York Mayor Bill DeBlasio‘s mandate to wear masks in stores, however, the federal government’s recommendations are voluntary. What’s more, Trump signaled his resistance to wearing a mask. “I don’t think I’m going to be doing it,” he said at the time, adding, “Wearing a face mask as I greet presidents, prime ministers, dictators, kings, queens — I just don’t see it.”

During an interview on Fox News on Sunday, journalist Chris Wallace asked Trump if he would introduce a federal mandate to wear face masks in public places where social distancing is not possible. Trump replied, “No, I want people to have a certain freedom,” he said, adding, “I don’t agree with the statement that if everyone wears a mask everything disappears.”

Asked if he takes responsibility for not having a federal policy on coronavirus during the interview, Trump replied, “Look, I take responsibility always for everything because it’s ultimately my job too. I have to get everybody in line. Some governors have done well, some governors have done poorly. We have more testing by fair than any country in the world.”

As of Monday, COVID-19 had infected 14.6 million people globally. It had killed over 609,198 people worldwide, according to Johns Hopkins University’s Center for Systems Science and Engineering. New York, the epicenter of the virus in the U.S., has still had the most deaths of any state (32,506), followed by New Jersey (15,715) and Massachusetts (8,433).

CityWatch:CDC confirms that coronavirus already spreading in New York City when European travel ban went into effect in March

On Feb 29, Surgeon General tweets his opposition to the public wearing masks. “Seriously people: STOP BUYING MASKS!” he tweeted. “They are NOT effective in preventing general public from catching #coronavirus, but if health-care providers can’t get them to care for sick patients, it puts them and our communities at risk!” He changed his mind on April 4.

The public was, understandably, confused. N95 masks appear to be effective for health-care workers. This study says N95 medical-grade masks do help filter viruses that are larger than 0.1 micrometers (One micrometer, um, is one millionth of a meter.) The coronavirus is 0.125 um. They have “efficacy at filtering smaller particles and are designed to fit tightly to the face,” it said.

The markets appear torn between optimism on vaccine research and the economic impact of new surges, particularly California, Arizona, Florida and Texas. The Dow Jones Industrial Index

closed higher Monday, as investors looked toward the prospect of further fiscal stimulus. The S&P 500

and Nasdaq Composite

also ended higher.

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The perils of waiting 10 days or more to get a coronavirus test result: ‘It’s only marginally better than not doing the testing’

When people first started showing signs of coronavirus in the U.S. in March they were told they needed special permission to get tested. 

If they didn’t fit into the high-priority bucket — which included health-care workers, people who were hospitalized, and people who recently traveled to China or came in contact with someone who did, they were often told to quarantine at home for 14 days. 

At that time, there was an extremely limited supply of testing kits, which backfired by helping accelerate the spread of coronavirus across the country because so many cases went undiagnosed, said Ashish Jha, the director of the Harvard Global Health Institute.

Since then, “testing capacity has clearly gotten better. At that time it was completely awful and now it’s inadequate,” Jha said.

So far, the U.S. has performed more than 45 million tests total, averaging approximately 700,000 a day “and that’s continuing to go up week to week,” Admiral Brett Giroir, a member of the White House coronavirus task force, who oversees testing, told reporters on Thursday.

Turnaround times for commercial test results “continues to be an issue,” Giroir, the assistant secretary for health at the U.S. Department of Health and Human Services, said. 

Wait times of more than ten days have become the norm for many Americans. There are, however, stories of people who have had to wait 26 days to get their results

“Once you get the lag of seven to ten days, it’s only marginally better than not doing the testing,” Jha said. 

Approximately half of the tests being performed daily are conducted by commercial labs such as Quest Diagnostics and LabCorp, Giroir said. The rest are done “at point of care, which is a 15-minute turnaround, or in local hospitals, which is generally within 24 hours.”

“Only one state has an average turnaround time of greater than five days. Five states are between four and five days. 26 states are still three days or less, and the rest are between three and four days.” Turnaround times of 10 to 12 days represent outliers, he added. Still, CityMD Urgent Care locations in New York, for example, says patients must wait seven days minimum for their test result.

‘Once you get the lag of seven to ten days, it’s only marginally better than not doing the testing’

— Ashish Jha, the director of the Harvard Global Health Institute

To reduce some state turnaround times, Giroir said he wants to transition to “care testing.” He also advocated for “pooling five samples into one.” 

Doing so, health experts say, would help labs churn through negative test results. The downside is that it prompts an additional round of testing if coronavirus is detected in the pooled sample. 

“It can decrease the turnaround time tremendously,” he said. However, Giroir said “the science is still being validated [and] the regulatory is still being authorized.”

The state of commercial testing in the U.S.

Quest Diagnostics Inc.
one of the largest labs in the U.S. performing coronavirus tests, said that the average turnaround time for non-priority patients is “seven or more days” and “slightly more than one day” for priority patients.

“We will not be in a position to reduce our turnaround times as long as cases of COVID-19 continue to increase dramatically across much of the United States.’

— Quest Diagnostics Inc

That’s after the company doubled its testing capacity compared to eight weeks ago, Quest said in a statement made on Monday. Testing capacity currently hovers at 125,000 tests a day, but by the end of the month, Quest said it expects to have the capacity to perform 150,000 tests a day.

“We will not be in a position to reduce our turnaround times as long as cases of COVID-19 continue to increase dramatically across much of the United States,” the company said. “This is not just a Quest issue. The surge in COVID-19 cases affects the laboratory industry as a whole.”


experience is nearly identical to that of Quest.

Both companies say that recent demand for testing in light of the country’s record daily cases that continue to climb cannot be met under their existing constraints. 

LabCorp said it has performed 7 million total tests since its test became available in March. Now it has been “able to process approximately 140,000 tests per day with plans to increase that to 150,000 tests per day this month,” a LabCorp spokesman said in a statement to MarketWatch.

Until recently, LabCorp said it’s been able to deliver test results back to patients on average between 1 to 2 days. “But with significant increases in testing demand and constraints in the availability of supplies and equipment, the average time to deliver results may now be 4 to 6 days,” he added.

“For hospitalized patients, the average time for results is faster,” LabCorp said.

But beyond the increased demand for testing, Jha pointed out that the long turnaround times cannot simply be pinned to one factor and can vary significantly at labs across the country.

For some, it boils down to not having enough reagents or swabs to perform the tests. For others, there could be a shortage of trained personnel to perform the tests that’s causing the delays. 

But it was “completely predictable,” he said. “The system was not designed to do this level of testing.”

“We designed a horse and buggy to race in the Indy 500 and we’re having a hard time keeping up,” Jha told MarketWatch, and it’s “making it so much harder to control the disease.”

Not all labs across the country are being properly utilized 

There’s a lot of capacity to do tests that’s sitting on the sidelines,” Jha said. There are many labs in the U.S. that have the ability to do coronavirus testing, but aren’t “because they’re using the machines for something else.”

“They don’t know that, if they stop doing the other stuff, if they’ll be able to get paid to switch to coronavirus testing,” he added.

Companies with the technology would still have to repurpose their machines for coronavirus testing, Jha said. “They couldn’t possibly justify spending tens of millions of dollars if they don’t know that this is going to be financially viable.” 

‘There’s a lot of capacity to do tests that’s sitting on the sidelines’

— Ashish Jha, director of the Harvard Global Health Institute

Giroir said that the price point the federal government pays to labs and suppliers of inputs for tests “is very fair and highly incentivizes people to do these tests.”

To ease their financial concerns, Jha recommended that the federal government pay them a portion of their fees upfront.  He has spoken directly to some of those labs that are already in a financial limbo due to a decline in testing volumes because non-emergency health visits have fallen.

There are only a couple of companies that make the reagents to perform the tests

The Centers for Disease Control and Prevention has not publicly disclosed how many companies commercially manufacture reagents, but Jha believes there’s only a handful of companies doing so.

In March, President Trump invoked the Defense Production Act calling upon traditional car manufacturers like General Electric

and Ford

to make ventilators. In April, he called upon 3M

to manufacture more N95 masks

Jha said that could have been prevented if Trump invoked that same act to mandate “companies that don’t make the reagents for these tests to start making the reagents.”

“Those companies are working full time, but they can’t ramp up production any more than what they’ve done,” he said.

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S&P 500 earnings set to plunge as the coronavirus batters all sectors — with Wall Street counting on a bounce that may not come

The one certainty about the outlook for companies in a COVID-19 world is that second-quarter earnings will be very bad — the worst, in fact, in more than 10 years.

Although Wall Street is betting that earnings will start bouncing off the bottom in the third quarter, the beginning point for that bounce is unknown, and early indications suggest the rebound’s magnitude may not match investors’ hopes.

As usual ahead of earnings season, since the reports cover the three-month period that has already passed, what companies say about the current quarter or the full year is more important than the results they’re reporting. But this earnings season may be different, as uncertainty over the impact of the COVID-19 pandemic has led many companies to withdraw guidance, leaving analysts more blinkered than usual when setting estimates.

About a third of S&P 500
component companies have pulled their financial guidance, and less than half the typical number of companies have so far provided quarterly updates ahead of earnings, according to Sebastien Leburn, senior portfolio manager at Boston Private. “There’s a deficit of information that needs to be filled at some point,” Leburn said in an interview with MarketWatch.

That puts the trajectory of the anticipated earnings bounce, which stock investors are banking on, on unsure footing.

“That’s why I think earnings will be very important, because they’ll provide a dose of reality,” Brad Cornell, professor emeritus of finance at UCLA, told MarketWatch. “They are going to tell us exactly whether a company is on a path that justifies this run-up.”

One aspect of the rally in stocks over the past few months is that it has been driven by a shrinking set of mega-capitalization companies expected to benefit in a post–COVID-19 world. All five of the most highly valued companies in the S&P 500 index — Apple Inc.
Microsoft Corp.
Google parent Alphabet Inc.
and Facebook Inc.
— have rallied by a double-digit percentage in 2020, while the S&P 500 has lost 1.4%.

‘That’s why I think earnings will be very important, because they’ll provide a dose of reality. They are going to tell us exactly whether a company is on a path that justifies this run-up.”

— Brad Cornell, UCLA

Those five companies have a combined weighting of more than 20% in the index, according to data provided by FactSet. That increases the risk for the broader stock market, as it heightens the importance of the earnings performance of a smaller set of companies. Disappointing results from other companies viewed as post–COVID-19 winners could also sap the market’s strength.

It’s not just the results that matter; so will any financial guidance they can provide to help justify the stocks’ gains.

“It’s all about clarity and having some guidance,” said Boston Private’s Leburn. “Without that, you have nothing to work with.”

The bad news is the actual numbers

The second-quarter earnings reporting season for S&P 500 companies unofficially kicks off before Tuesday’s opening bell, when a number of banks reveal their results.

Don’t miss:What to expect as banks report earnings: more loan pain but plenty of fee income

The aggregate blended year-over-year growth estimate for earnings per share, which includes some earnings already reported and the average analyst estimates of coming results, is negative 44.6% through Friday, according to FactSet. That would be the biggest decline in earnings since the fourth quarter of 2008, when earnings fell 70% in the midst of the financial crisis. It would follow 1% earnings growth in the first quarter.

“Second-quarter earnings will likely be a ‘kitchen sink’ report from many companies,” said Marc Lichtenfeld, chief income strategist with the investment and business newsletter publisher the Oxford Club. “They can throw in all of their write-offs and other expenses and know they will likely be forgiven for an earnings miss due to the extenuating circumstances.”

The current estimate marks a sharp drop in expectations as the coronavirus pandemic took firmer hold: The estimate as of March 31 was for a decline of just 11.1%.

All 11 S&P 500 sectors are expected to suffer negative earnings growth, led by energy, where earnings are projected to have fallen 151.7%, and consumer discretionary, which includes Amazon, where a 118.0% decline is forecast. Financials, which kicks off earnings reporting season on Tuesday, are expected to see a 55.0% earnings drop.

Information technology, which includes Apple and Microsoft, is expected to show a 9.5% earnings decline, while communications services, which houses Alphabet and Facebook, is expected to fall 30.7%. The best performer is currently estimated to be the utilities sector, whose earnings are forecast to be down 1.8%.

The outlook for sales is much better, with analyst expectations pointing to an 11.0% decline overall, with health care and utilities are the two sectors projected to see year-over-year sales growth.

The outlook for the third quarter is also bleak, just not as bleak as the second quarter.

The blended earnings-per-share estimate is for a drop of 24.4%, which compares with expectations of a decline of just 1% as of March 31. That would mark a second straight quarter of negative earnings growth, which by definition would mark the kickoff of an earnings recession.

That implies a bounce that recovers less that half the earnings lost since the first quarter. In comparison, the S&P 500 has retraced about 82% of the COVID-19 selloff from the Feb. 19 record-high close of 3,386.15 to the March 23 closing low of 2,237.40.

All 11 S&P 500 sectors are currently projected to suffer negative third-quarter earnings growth, led by energy at down 113.8% and industrials at down 59.8%. The best expected performer s utilities, at a 0.1%earnings decline.

Meanwhile, third-quarter sales are expected to decline at a 5.5% rate.

Winners and losers in a new world

Although the earnings outlook for the overall S&P 500 is uniformly negative, investors have made a clear distinction between companies expected to end up as winners in a post–COVID-19 world and those that will struggle.

Many believe the COVID crisis is creating a new world, while others believe the pandemic has just sped up the future.

“Historically speaking, crises have tended to accelerate macro trends already in place,” said Yancey Spruill, chief executive officer at DigitalOcean, a cloud infrastructure company. “The clear winners are enterprise technology companies whose infrastructure or software supports the shift to remote work environments and deliver services to customers in a low-friction manner through an internet-based interface.”

In this world, Spruill views Okta Inc.
Atlassian Corp.
Twilio Inc.
and ServiceNow Inc.
as cloud productivity tools that will likely continue to see “impressive growth.”

“Coronavirus has split the stock market like never before,” said David Russell, vice president of market intelligence at TradeStation Group. “Large swaths of the S&P 500 and even some members of the Dow Jones Industrial Average
have become irrelevant as newer software companies break out.”

A good example is Zoom Video Communications Inc.
Russell said. The video meetings service, which went public just 15 months ago, has a market capitalization of about $78 billion, which is bigger than the market caps of two hotel stocks in the S&P 500 — Marriott International Inc.
and Hilton Worldwide Holdings Inc.
— combined, and bigger than the market caps of six Dow components, including Goldman Sachs Group Inc.
and Caterpillar Inc.

Investors also seem to be betting on socially conscious companies following environmental, social and governance, or ESG, criteria.

“We were already seeing a shift of money into ESG funds before coronavirus, and the trend has continued with an embrace of electric vehicles and solar energy,” Russell said.

Opinion:Coronavirus can shake up ESG investing — here’s what investors should demand

For example, Tesla Inc.
is not yet a member of the S&P 500, but with the stock more than tripling this year, the electric-vehicle maker’s market cap of about $276 billion makes it the 15th most valuable company in the U.S.

COVID trumps political unknowns

One potential headwind for the stock market is the cloud of uncertainty blanketing the political landscape, in terms of what shape the next stimulus package, if one emerges, will take in the shorter term, and the Nov. 3 presidential election in the medium and longer terms.

See:Goodbye, extra $600: Unemployment benefits won’t exceed former wages in next stimulus bill, Treasury’s Mnuchin says

“Politics will undoubtedly play a role in the outlook and guidance for Q3,” said Ken Van Leeuwen, managing director and founder of the financial adviser Van Leeuwen & Co. “The current news cycle has been dominated by COVID-19–related [developments] and social unrest, but we feel that the election will be in the spotlight as we get closer to November.”

This could make it difficult for companies to provide investors with the clarity they’re desiring. And a continued reluctance to provide guidance could shake the stock market’s foundation.

“The continued information deficit can’t get stocks in trouble,” said Boston Private’s Leburn.

Others believe that politics is just a sideshow that can create short-term volatility for stocks, while lasting impacts are unlikely. Especially in the current environment.

“[T]he tremendous health and economic challenges associated with the COVID-19 outbreak mean that election-related political uncertainty isn’t the primary concern of business leaders,” said Mark Hamrick, senior economic analyst at Bankrate. “They have other proverbial fish to fry at the moment.”

Cost cutting and capital raising

Investors can brace for a fresh round of cost cuts and capital-raising activity to accompany earnings reports, as companies move to bolster liquidity and preserve cash as revenue shrinks.

Companies in the hospitality sector — restaurants, hotels, airlines, and rental-car companies — are most at risk, said Anthony Denier, chief executive of Webull, a commission-free trading platform. “Companies related to sports, such as Madison Square Garden Sports Corp.
will also take a hit. Entertainment companies like casinos and anything that puts on shows where large groups of people attend will also be hit hard.”

The handful of companies that have already reported or updated guidance reflect the trend.

Walgreens Boots Alliance Inc.
announced it plans to cut 4,000 jobs in the U.K., and United Airlines may furlough or fire up to 36,000 employees once the federal rules for accepting pandemic money expires on Oct. 1.

“This could expand throughout the entire airline sector,” said Denier. “AT&T also said it may cut jobs and close stores. Again, this might be a harbinger for the rest of the telecommunications industry.”

‘There’s so much liquidity and capital to put to work and so much trading on short-term trends and issues. It belies the underlying weakness and problems to come and it’s whitewashing many of those problems.’

— James Gellert, Rapid Ratings

Other companies to shrink head count include jeans maker Levi Strauss & Co.
audience-measurement company Nielsen Holdings PLC
motorbike maker Harley Davidson Inc.
and hamburger chain Shake Shack Inc.
which has failed to fully offset restaurant closures with delivery and pickup.

James Gellert, CEO of Rapid Ratings, a data and analytics company that assesses the financial health of private and public companies, said the quarter will reveal just how much companies have been destabilized by the pandemic — and it won’t be pretty.

Rapid Ratings conducted stress tests on 40,000 public and private companies, reviewing their financial health ratings prior to their first-quarter earnings releases to establish a true pre–COVID-19 perspective and measure how much they deteriorated after stay-at-home orders were put in place.

The stress tests showed deterioration in core health, which looks at longer-term stability, while shorter-term financial health ratings were not as badly impacted, “but I suspect after the second quarter we will see a precipitous decline in both,” said Gellert.

Overall, companies increased leverage, while revenue and profitability declined. That means higher interest costs but lower interest coverage amid a reduction in cash from operations.

“That combination of factors sets the stage for an enormously impactful second quarter,” he said.

Even after raising money at record rates, companies are expected to continue to issue debt, equity and convertible bonds in the coming quarters, as long as capital markets remain open.

U.S. companies issued a stunning $1.09 trillion of corporate bonds in 909 deals in the year through July 10, according to data provided by Dealogic. That shattered the previous record of $670.7 billion in 664 deals issued in 2015.

Companies issued $252.2 billion of equity in 659 deals, the Dealogic data show, trouncing the previous record of $206.1 billion in 599 deals issued in 2000.

Convertible bond issuance also set a record, of $180.4 billion in 543 deals, breaking the previous mark of $185.9 billion in 550 deals set in 2000.

“There’s so much liquidity and capital to put to work and so much trading on short-term trends and issues,” said Gellert. “It belies the underlying weakness and problems to come, and it’s whitewashing many of those problems.”

Crucially, buoyant capital markets are not reflecting the underlying weakness to come and the problem of long-term destabilization. “Nobody should equate strength in the S&P 500 with underlying corporate strength,” Gellert said.

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