Dear Valued Clients and Friends –
Market futures were up ~200 points from late evening all the way into the market open, and the market rallied hard into the open. Some additional big earnings/guidance announcements helped, but the European Union $2 trillion recovery plan deal did as well. I’ll unpack that deal more in Dividend Cafe on Friday. For now, the market closed up +150 points today, though the Nasdaq sold off (reversing yesterday’s big rally). Energy led the way today, while Health Care & Technology were the losers.
As for health data …
- Case growth Monday was 4.2% lower than Monday of last week. The national percentage of positive tests was down to 7.9%, the lowest in nearly two weeks.
- The Health & Human Services Department (which the CDC is an operating component of) has added a lot of very useful data to its website (taking over the data platform function from the CDC). I particularly found the ICU Bed Utilization by State to be very interesting. On one hand, there were only three states over 80%, and no states over 90% (I had read that much of the country was at 95%). Now, I also want to acknowledge, if one is in a county where ICU beds are 100% filled up (I am unaware of such), it would not matter if statewide it was only 70%. So state averages do not tell the whole story, and I acknowledge that. But I believe this overview provides a broad story that is useful to understanding, well, the broad story.
- Oh, and I would add the map showing the percentage of inpatients at hospitals with COVID-19 …
And finally, I thought this was encouraging. We know Massachusetts only had 255 new cases yesterday and 2 deaths, New York 707 cases with only 14 deaths, and New Jersey 131 cases with 23 deaths (all three much, much lower than where the case growth has been in the FACT states and some southern states). YET, note the “hospital inpatient bed usage” across all the below states … 70-80% appears to be the norm, everywhere.
* HHS Coronavirus Data Hub, July 20, 2020 (all three above charts)
- I am sure you all were as happy as I was to see that zero out of 346 NBA players tested positive for COVID yesterday at the NBA “bubble campus” in Orlando as they get ready to launch the belated NBA season end at the end of the month. July 30, my friends.
* Pantheon Macroeconomics, July 21, 2020
- Today’s testing data shows over 754,000 tests done today, with a positivity rate of 8.3%.
* The COVID Tracking Project, July 21, 2020
F.A.C.T. (Florida, Arizona, California, Texas)
- They reported 12,500 cases on Sunday, 10,500 on Monday, and 9,400 today. But to feel that we have a real detectable reversal of case growth in the cards we need to get a few more days here.
- The inpatient hospitalizations declined yet again (down 13.5% from a week ago), as did the use of ICU beds (down 7.5% from the July 12 high), and use of ventilators (down 13% from high).
- But the death reporting is becoming more maddening by the day. They removed 50 deaths from their tolls on Sunday, and re-added 50 deaths today. 35% of their death reporting the last eight days has been “backlogged death certificate matching.” There is no question that daily mortalities increased with case growth in June/July, but that increase on an absolute number basis is much, much lower than had been feared and projected.
- The chart below graphs out the actual date of death mortalities vs. the reporting date, and as you can see, tells a much more complete story.
* COVID Planning Tools, July 18, 2020
- Orange County is well below the threshold of concern with the California Public Health Department in three of five categories, and in the other two the number moved in the right direction again today.
- Available ICU beds in Texas hospitals have begun to increase over the last week
The percentage of COVID patients in Texas hospitals and beds being used by COVID patients has flattened over the last 7-10 days in Texas.
* Texas COVID-19 Hospital Census, July 20, 2020 (both above charts)
Of the 132 deaths reported in Florida today, and 134 in Arizona, just 19 and 2, were dated today. And it’s a pretty minimal number for the last few days that got “lumped” into today’s reporting. A lag is inevitable, but there is a big build-up in both states, and those numbers have to be broken out by an analyst (the resources in the state do not do it for you).
* Worldometers.Info, July 21, 2020
In market technicals, before the equity markets even warrant a mention, just note that the Euro to Dollar is above $1.14 and acting like a breakout is coming (so bearish dollar). The DXY (dollar to blended currency basket) is down ~4% the last two months.
I think for those curious about the potential but un-timeable bubble forming in big tech stocks, the last two weeks saw more retail fund money flow into the space than any two weeks in history.
And just to provide a little reference (for context) …
* Bloomberg, Jones Trading Institutional Services, July 21, 2020
On the public policy front, the issue of the payroll tax cut is getting the most press right now, primarily because POTUS has held it out as important to him, the media doesn’t believe it has adequate Republican support, and it knows it doesn’t yet have Democrat support. McConnell has not said much either way, but Sen. Thune and other GOP Republican leaders have clearly been non-committal on it (or negative, like Cornyn). The truth is that the White House has die-hard supporters (Kudlow), and supporters “for now” (Trump, Mnuchin), and until the GOP Senate sees that latter camp get behind the first camp they are not going to commit. No one is going to use any political capital here if they detect that POTUS himself won’t, so this issue sort of lingers out there. The press knows all this, and has begun batting it around as a sacrificial lamb that it may very well prove to be. But, if POTUS makes clear it’s a sine qua non for him, it will become so for others, and then things may get interesting.
In the Oil and Energy world, WTI crude was at $41.62 at press time as hopes for demand resumption ring loud. The energy sector rallied hard today. I have an update on the fracking sector coming tomorrow!
As for Housing, for those who missed the Wall Street Journal story, average 30-year fixed conforming rates hit an all-time low of 2.98%, and the 15-year dropped below 2.5%.
Anyone think this trend has assisted housing prices the last forty years?
And in Fed news, the Senate Banking Committee did, indeed, approve Judy Shelton for appointment to the Fed Board of Governors, which means a vote of the whole Senate is next.
Futures are up a tad …
Be well, be safe, be free.
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.