The Economist - USA (2020-08-08)

TheEconomistAugust 8th 2020 47

1

B

ob chapek, Disney’s boss, sounded a

cheerful note as he announced the en-

tertainment giant’s quarterly results on

August 4th. Its newish streaming service,

Disney+, has acquired over 60m subscrib-

ers in less than a year, one-tenth the time it

took Netflix to amass such an audience.

“Mulan”, an upcoming blockbuster, will be

released on Disney+ in September. “De-

spite the ongoing challenges of the pan-

demic, we have continued to build on the

incredible success of Disney+ as we grow,”

Mr Chapek intoned. The company’s share

price jumped by 5%.

If you tuned out the first part of Mr Cha-

pek’s statement—and six months’ worth of

covid-19 news—you might conclude that

Disney just had a bumper quarter. In fact,

as its theme parks shut down, cinemas

emptied and battered advertisers stinted

on commercials on its television networks,

the company lost $4.7bn. The reason for

the market chirpiness is that things could

have been far worse.

Disney’s experience sums up that of

America Inc more broadly. Investors have

been casting about for any signs of a re-

bound from the pandemic-induced reces-

sion. Real gdp shrank at an annualised rate

of nearly 33% in the second quarter. And

yet, with interest rates—and thus returns

on safe assets like Treasury bonds—close

to zero, money has poured into equities.

American share prices have risen by more

than 40% from their trough in March. The

s&p500 index of big firms is near an all-

time high; the tech-heavy Nasdaq market

reached it on August 4th. The feeling

among investors that “there is no alterna-

tive” to stocks is so pervasive that they have

dusted off an old acronym: tina.

In one way, the latest quarterly results

justify a degree of optimism. Three months

ago the situation was so uncertain that

many firms, not just in America, refused to

offer their habitual guidance about future

earnings—in some cases for the first time

ever. Bereft of milestones, analysts slashed

profit forecasts. Now it seems they may

have erred on the side of gloom. Jonathan

Golub of Credit Suisse, a bank, calculates

that for those firms which have already re-

ported their results for the most recent

quarter—a group representing 84% of the

s&p500’s market capitalisation—earnings

have beaten hyper-bearish estimates by a

total of 24%.

Bulls see other hopeful signs. After a

plunge earlier this year, capital spending

grew at its fastest monthly pace since Mor-

gan Stanley, an investment bank, began

tracking it in 2004. New orders for factory

goods rose by 6.2% in June. JPMorgan

Chase, a bank, believes that a global “syn-

Corporate America

The trouble with TINA

NEW YORK

Lessons for America Inc from the weirdest earnings in living memory

Rates ofinfection

S&P 500 non-financialrevenues,bysector

Q2 2020*, %changeona yearearlier

Source:JPMorganChase

*At July 31st; 50%

of companies reporting

1

-40-50 -30 -10-20 100

Energy

Consumer discretionary

Industrials

Materials

Communication services

Utilities

Consumer staples

Information technology

Health care

Property

S&P 500

total

Business

48 JoysofjoiningtheS&P 500

49 NvidiawoosArm

50 Microsoft’sTikTokgamble

50 SverigeABv DeutschlandAG

51 Bartleby:Calledtoaccount

52 Schumpeter: The future of trucking

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