Dear Valued Clients and Friends –
It is a bittersweet moment for me to present my last ever missive of COVID and Markets. Okay, it is a lot more sweet than bitter. I truly believe the essence of the markets lesson from COVID has been learned, and that the ongoing story of economic recovery, policy response, and all the various implications of things will live in for some time to come. But included in that essence is the reality of living with COVID, protecting the most vulnerable, and engaging trade-offs around reasonable safety measures for public health vs. the existential and economic need to have a functioning society. There are a lot of resources out there producing a truly intelligent, sober, and informed perspective on COVID medically, which really do seek to neutralize the panic-porn sensationalism so many have fallen into. This can’t be one of those resources. I don’t have the expertise or bandwidth to fully dedicate myself to COVID/medical information. It has been integrated with my work for six months, and I am proud of what I have learned and what I have presented, but it was always, always, always intended to be a part of the broader economic and markets story.
I know not what Governor X will do next week or Policy Y will be the week after. What I do know is that markets will be impacted in the days, weeks, months, quarters, and years to come by public policy, by monetary policy, by corporate finance, by operational savvy, by business investment levels, and so much more. The COVID era of 2020 profoundly influenced all of that in the present tense, and will leave a both static and dynamic impact to all those things into the future. But the actual daily COVID anxiety in a macro sense must be contained, now. It must be understood. It must be appreciated. We have a very infectious virus that creates true risk for a vulnerable segment of society. What those risks are were not super known six months ago; they are now. What those vulnerable segments are was not understood six months ago; it is now.
I wish for the mainstream reporting of COVID to stop presenting data that sounds bad, but really isn’t. That is because it is misleading and dishonest and is preventing a needed normalization process in a society craving normalization (existentially and economically). But I also don’t want to continue presenting data daily that is equally redundant, just to continue countering their redundancy. I am bored of it, to be honest. And I want to practice what I preach.
I am a markets guy, with every ounce of breath in my body. And the COVID part of COVID & Markets is no longer on my front page, and shouldn’t be on yours either. So I have to be honest.
Key news around vaccine development will be relevant in the months to come, and I will report it in the The DC Today, my new daily market bulletin. Other COVID data and studies surely will warrant coverage, and I am not going blind to it. I just want to move the ball towards normalization, avoid redundancy, and get back in the lane my clients pay me to be in.
So let’s go around the horn one last time. And may we one day look back on this entire period as one of tragic loss, of incredible learning, and as formative in our improvement as smart investors, and free people.
The market dropped 130 points today but had been down about double that in what was a zig zag of a day without much conviction.
* FactSet, DJIA, Sept.29, 2020
Please do read the concluding thoughts at the end of this. The summary of it all means more to me than any data I provide herein. Off we go!
COVID Health Information
- There have been increases in cases (barely) in some states like Idaho, Montana, and Wyoming. There continues to be decreases in cases (significantly) in states like Florida, Arizona, Georgia, and Tennessee. In almost all geographies the testing numbers are way up, explaining the case number, and yet the positivity rate remains between 4.5% and 5% around the country.
- The fascinating theme I see across the pond is an increase in cases in major Western European countries (Spain, France, UK, etc.) followed by policy announcements mostly reflecting the lessons learned of the spring and summer. Most European countries are taking a much less restrictive approach in this period.
- Moderna had huge news after market in their vaccine data, with significant antibodies in older people offering tremendous COVID protection. It was only forty volunteers but 100% developed antibody protection with essentially no side effect issues. Big news!
- I thought this heat map was quite good at giving you the lay of the land of average deaths, week over week.
*DOMO, Coronavirus Tracker, Sept. 29, 2020
- I found this transcript to be one of the most insightful things I have read about COVID. The panel consists of Stanford Prof. of Medicine Dr. Jayanta Bhattacharya, Harvard Medical School Prof. of Medicine Dr. Martin Kulldorff, & Stanford Prof. of Structural Biology Michael Levitt. I cannot possibly tell you how much fascinating information there is around the medical lessons learned from March all the way through today.
- Interesting to see the New York Times having to run this headline now
- Not to take away from Moderna’s vaccine news, but Regneron had very positive news on their therapeutic trials, as well
* Pantheon Macroeconomics, Sept. 28, 2020
Monday’s testing data showed over 1,033,000 tests done, with an all-time national low positivity rate of 3.6%.
Today’s testing data shows 813,000 tests done, with a positivity rate of 4.5%.
* The COVID Tracking Project, Sept. 28, 2020
- Beyond the collapse of hospitalizations I showed in the last missive, the decline in mortalities has both been truly encouraging to see, and a case study in the bizarreness of the way the data has been reported (backlog cases and “daily” reporting seeming to be a concerning number even as daily deaths were collapsing)
- New York
- The unemployment rate in New York City is 16%, twice the rate of the rest of the country. So the partial opening of indoor dining for the first time in over six months today could not come at a more crucial time. The major need to the economic infrastructure of New York City right now is to have an economy that is open, which may not seem like the most profound thing I have ever said.
- You really couldn’t imagine a more classic case of “click bait” than some of what the press has said about New York in the last few days. Positive tests in New York City are a whopping 1.1%, the lowest of any populated city in the country. Yet I have read a dozen headlines of a “surge of mass cases,” only to click the panic-porn link and see that they are referring to one or two blocks in a select neighborhood that had a couple dozen cases, etc. The city is seeing 4 new cases per 100,000 population per day, testing about 35,000 people per day, and out of 1,769 zip codes in the state, just ten have an infection rate above the target.
- I chose to use the Hospital and ICU bed data for Arizona because it was the metric most feared in the summer’s case growth, and because the COVID use of hospital and ICU beds now is so far below the PRE-summer “surge.” Lower now, then before the events of this summer. And never, ever, ever even remotely covered.
*Arizona Department of Health Services, Data Dashboard, Sept. 29, 2020
This reminds me of a tweet I sent once (just feeling nostalgic).
- Orange County has now completed two weeks in the “moderate zone” (tier 3, orange) which means they soon move to the latest round of restriction easings (it is now a three week requirement). Total hospital patients with COVID are at 161, but that includes the 46 in ICU. There are 3.5 million people in Orange County and 6,500 hospital beds
- You can use your own eyes to assess the progress in Texas. It is surreal to see this and think back to the predictions made in the summer about the Dallas, Houston, and Austin hospital systems.
*Texas Health & Human Services, COVID-19, Sept.29, 2020
It would not be complete to the section of this missive formerly known as “F.A.C.T.” to not mention that after a summer of wall-to-wall coverage and severe fear of where these states were going (I can send you dozens of headlines referring to an apocalypse of death and mayhem exceeding the peak levels in NY of spring), as we bid adieu to this writing, Arizona is #9 in the country in mortalities (per capita), with Florida #12, Texas #18, and California #26. All of us can be forgiven for assuming that the numbers were far, far worse.
*Worldometers.Info, Sept. 29, 2020
Stock Market Today
A 7-to-1 advance/decline ratio yesterday marked the strongest breadth and market internals in months.
* Strategas Research, Daily Technical Strategy Report, Sept. 29, 2020, p. 2
Speaker Pelosi has said House Democrats may vote on a new House version even if progress is not made with Secretary Mnuchin on a big picture deal, something she previously resisted but has been forced to by moderate Democrats in the House. This smaller, targeted package would at least include airline, restaurant, and re-loaded PPP provisions.
As of now, my forecast is that a last-minute extension will be reached on the airline relief aid, and that tens of thousands of layoffs will be avoided. (Speaking here just to the airline issue).
The last word I got before I had to go to press with today’s missive is that the House has submitted their $2.4 trillion bill to the White House. Larry Kudlow said today that the White House is ready to make a deal. Secretary Mnuchin reportedly spoke with Speaker Pelosi at length today, and the White House is saying we will know more in 24 hours. I have some sources telling me how state and local aid can be in the bill and how the GOP will have an “out” to vote for it. More to come!
Oil and Energy
WTI crude dropped $1/barrel today …
Ongoing volume of activity seems likely for the time being. Supply-demand imbalance combined with insanely low rates are the perfect combination to drive activity in the lower end of the market.
*Pantheon Macroeconomics, U.S. Economic Monitor, Sept. 29, 2020, p. 2
It wouldn’t be the last COVID & Markets missive without some tribute to the most significant actor in markets of the last six months, or without a chart that sort of tells the entire story.
Futures are pointing up ~110 points. I hope you have learned by now how incredibly dumb and worthless this section of my missive has been.
Be well, be safe, be free.
I mean all three of those things from the bottom of my heart. I want financial security to be available to every reader of this missive, so as to enhance or facilitate their wellness.
I want you all to be safe from sickness and disease, for you and your loved ones to be healthy and well.
And I want all of us to be free, to live our lives and chase our dreams. I want us all to pursue happiness. And I want us to love the “animating contest of freedom more than the tranquility of servitude” (Samuel Adams). For indeed, “Those who know what virtuous liberty is, cannot bear to see it disgraced …” (Edmund Burke)
David L. Bahnsen
Chief Investment Officer, Managing Partner
The Bahnsen Group
This week’s Dividend Cafe features research from S&P, Baird, Barclays, Goldman Sachs, and the IRN research platform of FactSet.