Dear Valued Clients and Friends –
The market had been pointing to a modestly positive opening all night and into the very early morning futures action, but around 5:30am turned south, again led by technology. The market opened down 250 points, and then went up 500 points (so up 250 on the day), and then bounced around throughout the day. It closed up just +50 points or so with all indexes about the same on the day in percentage terms.
* FactSet, DJIA, Sept. 24, 2020
The timing of the downturn this morning came right as the weekly jobless numbers came, but truth be told there was nothing unsurprising at all in the jobs data, so I doubt that was related. More or less, I think the markets are zigging and zagging because that is what they do – and notoriously so this time of year. I do not expect anything different for the next couple of months.
Lots and lots of COVID info today, and plenty on housing etc. — off we go!
COVID Health Information
- There will be nothing I can do or nothing you should do about the onslaught of coverage that will come over the next 5-6 weeks about “new cases surging again.” I do think there is a chance I am wrong, but I am pretty sure it is coming, not in terms of any real health change or substantive data metric, but in the absence of real exhaustion of medical resources and in the absence of growing severities and mortalities, I do believe the precedents I have studied over the last few months suggest a “rotation” of coverage from the media that will move back to cases, and with testing where it is, I expect some form of negativity to be extracted that makes its way into headlines for the next 5-6 weeks. I think markets have plenty of other things to worry about, and have been numb since June to the reality of the need to live with COVID cases and its accompanying risks.
- The latest headlines I am getting from the panic-porn crowd are some version of, “Yes, hospitalizations and deaths are still dropping, but there is no way that can continue.” So there you go. Here is the trajectory of hospitalizations straight from the CDC website. I am taking for granted that you share my belief that an increase in mortalities would come after an increase in hospitalizations, not after a decrease in hospitalizations (think through it for a bit if any questions).
*Center for Disease Control & Prevention, COVIDView, Sept. 24, 2020
- And as for hospitalizations, I also am taking for granted that we all understand why hospitalizations come after an increase in COVID-like illnesses (flu symptoms, pneumonia, shortness of breath, etc.) – not after a decrease.
*Center for Disease Control & Prevention, COVID Data Tracker, Sept. 24, 2020
- Back-filled case growth has to run its course, and then I believe the metric I am not focused on will reflect even better data, and I don’t know where the narrative goes then.
- The current Serious/Critical cases in the United States are 14,059 (population: 330 million), out of what is reported as 2,549,641 “active” cases (right at HALF OF ONE PERCENT). My coverage of this category has been on hiatus (my bad), but it had been exponentially higher in past months.
- Johnson & Johnson is the latest of the major vaccine programs under way to enter late-stage trial testing for its COVID vaccine treatment. 60,000 volunteers globally will be a part of the trial. This is now four treatments (the others being Moderna, Pfizer, and Oxford) in final stage trials. Much of the optimism around this JNJ/Janssen treatment is a by-product of their success with similar technologies for an EBOLA vaccine. Early stage results showed phenomenal results in primates and hamsters, and the company has shared immune response in humans has been comparable.
- A big picture summary of vaccine efforts:
*Strategas Research, Policy Outlook, Sept. 24, 2020
- A fascinating new study suggesting … “Increased household exposure to young children was associated with an attenuated risk of testing positive for SARS-CoV-2 and appeared to also be associated with an attenuated risk of COVID-19 disease severe enough to require hospitalization”
- The Pac-12 appears set to announce fall college football will, in fact, be coming (starting early November). You truly have to admire their profile in courage, eh?
- Deaths per week based on date of death, showing how the summer peak never got close to spring levels, and the consistent and significant down-tick the last six weeks:
*Center for Disease Control, COVID-19 U.S. Mortality Data, Sept. 23, 2020
- School openings seems to be going quite well, and some seem quite surprised.
Today’s testing data shows over 1 million tests done today (a new record for those who care about this), with a positivity rate of 4.3%
* The COVID Tracking Project, Sept. 24, 2020
Key States
- California
- It was one thing when thousands of gyms, hair salons, churches, and mom & pop restaurants were pleading for greater bandwidth from state authorities in opening. But now, it appears some pretty big players are upset. And hell hath no fury like Mickey Mouse scorned.
- Florida
- The deaths Florida has reported the last two days were 90%+ back-log reporting …
* Worldometers.Info, Sept. 24, 2020
Stock Market Today
Do with this what you will, but as of this morning (it was up a bit today), the S&P 500 is down 9.8% from a high point it hit September 2, and the Nasdaq is down 12% from its peak (note, in both cases that is a % move down from an intra-day high, not a closing high, but you get the point). And in those 22 days, with those two juicy indexes down 10-12%, the 10-year bond yield started at 0.66%, and right now, is …
0.66%.
A little 3-week microcosm of a huge, huge point I have been making for months. The future of “Boring Bonds” (my new academic term for what we used to academically call “Bonds that Act Like Bonds”) is one of no income, and no risk mitigation. Capital preservation? Probably. But capital preservation, with an income feature and with a risk mitigation during volatility feature? I am afraid not.
Oil and Energy
Still sitting there at $40/barrel plus change, even with equity market volatility.
Housing Market
New home sales in August were back above 1 million – the highest level since 2006. It was primarily the south region of the United States that was behind this, as the northeast was flat midwest and west were down. All of the demand increase has come from the sub-500k level in price point, suggesting a lot of the demand are younger buyers looking to leave an apartment rental situation.
Home price appreciation is generally greatest in lower price tiers: 
The weekly Dividend Cafe is coming as always tomorrow. I do hope everyone has a really lovely weekend. I am blessed beyond words for the chance to do this for you all.
Futures are up 120 points but it is early in the evening.
Be well, be safe, be free.
With regards,
David L. Bahnsen
Chief Investment Officer, Managing Partner
dbahnsen@thebahnsengroup.com
The Bahnsen Group
www.thebahnsengroup.com
This week’s Dividend Cafe features research from S&P, Baird, Barclays, Goldman Sachs, and the IRN research platform of FactSet.
