Dear Valued Clients and Friends –
The market rallied 160 points today (but the S&P and Nasdaq rallied double that level). I am fine to say some of the extra lift in the final couple hours of trading were related to the Fed’s words today, but someone would first have to tell me what the Fed said that every man, woman, and child on God’s green earth did not already know. Today was a day the market just went up a bit, and didn’t need much of a reason – some good earnings, a reinforcement of the Fed being there with a put option, and perhaps some leakage around tomorrow’s big earnings announcements.
* FactSet, DJIA, July 29, 2020
Lots of lots of good stuff today – take it all in!
COVID Health Information
- In the “F.A.C.T.” section below, you will see what I believe is the most important data point this summer around the Arizona/New York case data …
- Yesterday’s new cases vs. the Tuesday of last week declined 4.5%, making it the third day in a row of week-to-week decline, something that Pantheon pointed out to me this morning has not happened since late May. The 7-day moving average of new cases is down 4% since its peak.
- The California and Texas hospitalization reporting is totally screwed up, and so national trends are distorted when two of the largest states can’t get their reporting straight. Where states had a hospitalization issue and are not struggling with reporting, the trend is very clear that hospitalizations are declining, ICU’s are declining (though not as much as hospital admissions), discharges are increasing, and stay time in hospitals has been cut in half from what it was in April.
- I want to provide all data, good and bad, so I have been including each day the facts around case growth in some states like Oklahoma, Alaska, Rhode Island, etc. And while the empirical fact of case growth, not case decline, has been pointed out there, I think it adds to the honesty of the presentation to mention that the “case growth” there has come off of very, very low bases.
- A fascinating look at Sweden’s situation with some quotes from the “Anthony Fauci of Sweden” (Anders Tegnell) throughout.
- I read a fascinating study this morning from the Mayo Clinic concluding that there have been substantially lower COVID infection rates for those who have received vaccines in the last five years for non-COVID related diseases such as polio, Hepatitis, geriatric flu, and others … Happy to send to those interested (a heavy read).
- Sometimes the thing to do when forecasts are off is not be critical, but be grateful. And also, to learn for the future …
- Our daily quadrant of charts …
* Pantheon Macroeconomics, July 29, 2020
- Today’s testing data shows nearly 840,000 tests done, with a positivity rate of 7.8%.
* The COVID Tracking Project, July 29, 2020
F.A.C.T. (Florida, Arizona, California, Texas)
- They reported 9,400 new cases (fourth day below 10,000, but still not dipping below 9,000) and 216 new mortalities. However, of the 216 reported, only 13 were from yesterday/today. The daily death reporting is on average ~60% mortalities from 10-20 days ago. The “date of death” peak appears to be July 16, but we will want more reporting data out of the embedded lag in the next 7-10 days to confirm this.
- In the two weeks from July 11 thru July 24 there were 11 days that new cases exceeded 10,000, and the daily average was ~12,000 cases. That number has dropped 25% over the last week.
- I saw a plethora of mentions this morning that Arizona’s cases-per-capita had exceeded New York’s, and I found the press coverage fascinating for what it did not include:
* Worldometers.Info, July 29, 2020
Yes, Arizona’s COVID cases per capita have passed New York’s (though actually that is surely not true either, as the total positive but untested cases from February through April was probably many multiples of the data we actually have, but let’s just use reported test data). But the whole point I think many have been trying to make all summer is that case growth was not the operative variable; hospitalizations and mortalities were. And Arizona, with 101% of the cases per capita of New York, has just 27% of the deaths per capita. That either reflects a healthier, younger demographic testing positive now, improved treatments in the summer versus spring, a more mild strand of the virus, or a combination of all of the above.
- Arizona’s hospitalized COVID inpatients today were the lowest since June 23 and ICU beds lowest since July 3.
- New cases in Orange County dropped to 187. They were 1,200/day a few weeks ago. Inpatient hospitalizations are down by 11.3% in the last two weeks. All metrics are just substantially improved, to a point where one would think the Governor may be changing some policies pretty soon. One. Would. Think.
- Not to ignore Riverside County … Note their hospitalization trajectory:
* Riverside County COVID Dashboard, July 29, 2020
- Their positivity rate is down to 12.5% from 17.5%, and hospitalization data is all substantially better, but some regional reporting still appears noisy to me.
* Worldometers.Info, July 29, 2020
Stock Market Today
The market has moved further above its 50-day and 200-day moving average, giving those who believe in technical analysis less excuse for non-bullishness, but the put-call ratio remains extremely low (indicating too much complacency, and therefore for contrarians, a short term risk). This time of year into an election season generally becomes choppy/flattish, but I would argue that was likely to be the case even apart from the election dynamic.
* Strategas Research, Daily Technical Strategy Report, July 29, 2020, p. 3
All elected leaders seem to be posturing that “we are not close” and “our two deals are irreconcilable” etc. Pelosi and Schumer seem to be testing McConnell as to his seriousness about liability protection being a sine qua non in this bill (he swears it is).
I offer my own views of what the stimulus should and should not include here (if interested, that is).
The Fed announced no change to interest rates today. They reiterated a pledge to use “full range of tools” to support the economy “as long as it takes to recover.” The next expected change or potential change may be in September if they do opt for some form of Yield Curve Control, and certainly around more intentional forward guidance.
Futures are down a pinch – barely noticeable. Big earnings day tomorrow across the market.
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.