Covington Investment Advisors, Inc. Blog

2020 Earnings Update  Strict government-imposed restrictions including shelter-at-home policies did not come into place until mid-March across most of the country. This means that the impact to corporate earnings will not be reflected fully in first quarter numbers but more completely in second and third quarter results. First quarter earnings have so far been fairly solid with most companies reporting results in line with initial expectations. As expected, most companies have been cautious with giving too much insight into what upcoming quarters numbers will look like. Roughly half of S&P 500 companies provided 2020 EPS guidance through the end of February. If early reporters are any indication than many of these companies will continue to not give 2020 guidance or withdraw previous projections.    While poor upcoming numbers are largely already being priced in by investors, the second and third quarter will presumably be a bumpier earnings season as the...

Reopening of the Economy  The next step as we move through this virus pandemic is the reopening of the economy and a return to normalcy. Although the “reopening” of the economy is talked about as a singular moment where economic activity is resumed, we see it as more of a process that will take place over the next 2-3 quarters. The economy being “open” is one thing, but the return to normalcy is the more difficult time window to predict. It may take years for several aspects of the economy to return to pre-virus conditions. Financial markets, particularly the fixed income market, have likely been changed for a significant period of time on behalf of the unprecedented central bank stimulus taking place across the globe.   The virus has not affected all regions equally and this will not change once economies reopen. Those parts of the country that have a...

Where We Are in The Life Cycle of COVID-19   Last month we provided a framework for how we believed the COVID-19 life cycle would play out considering current available data and past virus outbreaks keeping in mind different countries progress at different paces. At that time, we felt the United States was in stage 3, preparing to move to stage 4 of the virus’s life as local transmission began to take hold and sustained government action was taking place. Since then we have seen unprecedented government lockdowns across the country, social distancing/mask requirements, increased urgency on the part of the government to develop nationwide testing, and pharmaceutical companies rushing to find a potential vaccine. Today we believe we are in the mid-to-latter part of stage 4 where our healthcare system has absorbed the shock from the wave of new virus patients and cases continue to grow. New daily cases...

Case Growth     COVID-19 cases in the US continue to grow but the encouraging sign is that the case growth rate appears to be slowing down. After reaching a peak on April 4th, shortly after government shutdowns were enacted, new daily cases have been relatively flat. Hopefully as the US continues to follow Italy’s path total cases will also continue to taper off. This slowdown of the virus is key not only for ensuring medical institutions are not overwhelmed but also for being able to reopen the economy. We continue to monitor these developments and as more information becomes available, we will be sure to keep you informed. Pat   Commentary Disclosures: Covington Investment Advisors, Inc. prepared this material for informational purposes only and is not an offer or solicitation to buy or sell. The information provided is for general guidance and is not a personal recommendation for any...