COVID Markets Missive – Thursday Sept. 3

Dear Valued Clients and Friends –

The market dropped ~800 points on the Dow today (-2.7%), but the Nasdaq dropped 5% and the S&P dropped 3.5%, as a big sell-off in big tech ripped through markets.

* FactSet, DJIA, September xx, 2020

The initial jobless claims number came in at 881,000 this morning, much better than the 950k expected and only the second time since March below one million.  Continuing claims fell to 13.3 million, a full 1.2 million less than last week …  The full August BLS report comes out tomorrow morning.

Off we go …

COVID Health Information

  • Confirmed cases in the U.S. are running about flat this week to last week, which leads some to say, “oh good, cases are not further increasing,” and it leads others to say, “see, the rate of decline has flat-lined.”  It would seem to me that neither posture is the most astute given all we have learned, particularly in the context of applying COVID to our economic and market and societal realities.  But as long as the focus is wrongly put on cases versus the other metrics we have learned are more systemically significant, that debate will likely continue.
  • If one were inclined to earnestly follow the case growth numbers, though, and I certainly provide them here (despite my insistence that they are of little use I still play along), it would be noteworthy that while case growth has flattened, testing is actually up 6%, with the positivity rate is down to the 5-handle we were waiting for.  In other words, adjusted for testing, cases are continuing to decline.
  • If there is one “prediction” I can offer here (and if there is anything NO ONE should be doing around COVID based on the last four or five months, it is making predictions), it is that we will see cases on college campuses in the coming weeks – cases that will create little or no hospitalizations – result in the next round of headlines and hand-wringing (and everyone can decide for themselves if such will be justified or not).  P.S. – 546 positives art University of Kansas – zero hospitalizations; Ohio State University 882 positives, zero hospitalizations.
  • I am encouraged (though as I said the other day, not surprised) at the severity data for the new cases in Europe.  The UK had 1,750 new cases reported yesterday (in a population of 67 million), but ONE death.  One.  Italy has a similar size population, and is averaging 600 cases per day, with FOUR deaths per day (average for the last month).  Yes, both countries saw an uptick in cases late summer, and yes, the mortality rates of March/April are long gone.  But so are hospitalizations, ventilators, etc. – the severity level is not there as cases have switched to a younger population.  In this case, it is less plausible to credit better treatments, because these are cases never even getting to the level of treatment.  I also understand the hope (for some, the belief) that a less severe virus strand is what is circulating now (I just can’t validate such).  But more and more evidence is indicating that a lot of the positive testing from PCR tests is capturing viral particles, not a whole virus, not capable of replication, and not likely to create damaging COVID in the person producing the positive test.  Oxford’s professor of evidence-based medicine, Carl Heneghan, has done significant work in this vein and I am continuing to follow his and his colleagues research on it.

  • Yesterday Massachusetts determined that 7,757 cases they previously included in their positive tally were not, in fact, COVID.  The national tracking databases removed those and did not count them as declined cases – they eliminated the whole consideration.  Fine.  But they WERE counted as positives when those numbers came into the tally.  You see my point?  There are just all sorts of data anomalies like these, and I am not suggesting any funny business from anyone – the data is weird and lumpy and tricky at times – but there is time and time again situations where numbers look meaningfully worse than reality, and when a certain number clean-up/adjustment could cause a more favorable conclusion, they are excluded.  It makes it very hard for those looking for an objective understanding of the data on the ground.
  • A new study is all the buzz – as more and more support is evident for the durability of antibodies …  Oh, and they estimate a 0.3% infection fatality rate.
  • Pfizer announced that their late-stage vaccine results will be available next month, and that, if positive, they will immediately file for emergency use authorization
  • It appears there is a chance the Big-10 will be re-voting about college football in the fall tomorrow.  I know this doesn’t seem like pressing COVID news to you, but it is to me.

* Pantheon Macroeconomics, Sept. 2, 2020

  • Today’s testing data shows over 724,000 tests done today, with a positivity rate of 6%.

* The COVID Tracking Project, Sept. 3, 2020

Key States

There were 18,271 hospitalizations a week ago across Arizona, California, Georgia, Florida, and Texas.  There are less than 15,500 now – in total – across all five of these states.  This is a weekly decline of 15%, and cases are declining too, so hospitalizations obviously will continue to decline.  By the way, 1,500 of these hospitalizations (10% of them) are not known COVID cases, either – but California and Georgia add a “suspected” hospitalization category (if only there were a way to know if someone has COVID or not, like some sort of a test?).

  • Florida
    • New cases were down to 2,400 yesterday and were at 3,500 today.
    • The MEDIAN age of the 147 deaths they reported today (mostly backward looking re-surveillance) was age 93.  The MEDIAN.  HALF of these deaths are over the age of 93.  This death certificate surveillance thing was a heavy part of Arizona’s mortality county staying elevated for longer this summer.  It is not illegal, but it also does not necessarily tell you what you may want to know about present health and conditions …
  • California
    • The trajectory of cases in Orange County appears to be headed in the right direction, at least if I am reading this chart correctly.

*Orange County COVID-19 Dashboard, Sept. 3, 2020

  • Texas
    • Speaking of declining positivity rates … back to mid-June levels.  =)

*Texas HHS, COVID-19 Dashboard, Sept. 3, 2020

Crazy similarity to yesterday’s new case number and today’s …

* Worldometers.Info, September 3, 2020

Stock Market Today

Really all focus today was on the market sell-off, which in all likelihood was a tech sell-off that then spread a bit as ETF’s had deeper redemptions to fill, etc.  It is very difficult for a rally or a sell-off to “stay contained” these days with the heavy level of index/fund/ETF ownership we now have.  The markets actually rebounded over 200 points in the final half-hour of trading which surprised me.  We go into a long holiday weekend tomorrow so we will see if traders assert a risk-off or risk-friendly posture in the dead of the weekend.

My own view is that there is no way in the world to know if this is the inevitable “air out of tires” moment for tech.  I do believe it is coming, but a 5% drop in the Nasdaq today is not it.  We’ll see (a) Where it goes from here, and (b) If it works it way into other sectors (i.e. leadership shift) vs. broad sell-off.

Public Policy

The CDC (of all governmental agencies?) issued a sweeping and nationwide order Tuesday night halting landlords from evicting renters (if they make <100k single and 200k married, which covers the lion’s share of residential renters in our country).  Renters would theoretically still owe accrued rent if they participate, and they must sign a sworn affidavit that they would be homeless if evicted.  It is not immediately clear to me what the policy impact will be, or how many renters will choose to participate.  I do suspect it is potentially added incentive to the House Democrats to agree to a real stimulus deal legislatively as it risks looking like the only relief is coming from White House efforts if they do not.

The chess game continues.

In the meantime, Chuck Schumer is amplifying Democrat demands for a very bill, and Mitch McConnell is circulating that the Senate GOP plan of a much smaller cost will be ready for a vote next week.

Oil and Energy

Interesting to note – oil prices barely down today despite big market sell-off; the largest energy company in the market ~flat today despite market angst …  De-correlation with energy and equities may finally be here …

Federal Reserve

The Fed’s view (and they are absolutely right about this) is that COVID is a dis-inflationary event, and they are treating it as such in all monetary response.

*Pantheon Macroeconomics, U.S. Economic Monitor, Sept. 2, 2020, p. 1


August jobs report coming tomorrow morning bright and early.  

Futures are pointing to a Dow down 60 points but a Nasdaq down another 1.5%.  The night is young.

Be well, be safe, be free.

With regards,

David L. Bahnsen
Chief Investment Officer, Managing Partner

The Bahnsen Group

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About the Author

David L. Bahnsen


David is a frequent guest on CNBC, Bloomberg, and Fox Business and is a regular contributor to National Review and Forbes. David serves on the Board of Directors for the National Review Institute and is a founding Trustee for Pacifica Christian High School of Orange County.

He is the author of the books, Crisis of Responsibility: Our Cultural Addiction to Blame and How You Can Cure It (Post Hill Press), The Case for Dividend Growth: Investing in a Post-Crisis World (Post Hill Press) and his latest, Elizabeth Warren: How Her Presidency Would Destroy the Middle Class and the American Dream (2020).


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