Corporate Earnings and COVID-19

The media are already full of stories of  businesses in distress and of only a few  that are thriving but this is only the beginning. Among larger companies, the Q1 US corporate earnings season has come too early to provide hard numbers but should give some initial indications of what to expect. There will be a lot of ‘getting the bad news out the way quickly’ and blaming COVID-19 while some companies will be more forthcoming in their future guidance. So far 14% of S & P 500 companies have reported on average a drop in both sales and earnings, with the industrial, consumer discretionary, energy and financial sectors being the most affected. Government intervention and debt levels will impact companies of all sizes but most of the initial pressure will be on smaller businesses, with hits to employment and consumption rippling outwards and upwards. Government bailouts will almost certainly be insufficient and result in some unfairly missing out but moral hazard will be too tempting for others to resist abusing and even fraud. For now survival is the main task for most, with or without help from their bank!