Dear Valued Clients and Friends –
As it is a “weekend” edition and is the market has been closed, I am focusing all attention in this missive on health data, particularly as there is more health data, information, and perspective to share than even normal. That said, there are some particularly important public policy developments that I will be highlighting in the Monday missive.
The market followed its +800 point week from the first week of July with a +300 point week last week, despite up and down movements each day of +/- 300 to 400 points each day. The market’s 1,100+ point move as case growth and health pandemic news reaches new heights is relevant, but it is not relevant because it means “the market is out of the woods.” I would suggest plenty of market vulnerabilities exist; it is just that media hysteria around case growth is not one of them.
As for health data, we remain in volatile times. Cases are growing and in some states positivity rates have grown as well. On the other hand, pleas that the focus be on mortalities, mortality rates, and medical resource utilization are not exactly being heeded by the media.
My agenda here at COVID & Markets continues to be the objective presentation of data, avoiding the sins of omission that plague much of the data you will find in mass dissemination venues. Ultimately, this objective is connected to where we see economic and market impact. I cannot emphasize this enough – a host of agendas exist out there with strong feelings and strong opinions from a whole host of people on a whole host of issues. And I am not speaking to the legitimacy or illegitimacy of any of those agendas, per se. I am simply saying those issues are not my agenda here at COVID & Markets. My purpose is not to adjudicate past public policy, it is not political, it is not about mask-wearing, and it is not to participate in yet another cultural divide. I believe the media is sensationalizing something inappropriately, but I believe the media does that as an inherent inescapability, and you can find impassioned sources for media bashing anywhere. What I want to make this unique and valuable is trustworthy data, connected to an economic and market relevance.
So with that said …
- The mortality data we get is reported by states. The date of when the deaths happened is irrelevant to the media. If 2 people died on a day in New Jersey, and 55 people died weeks and months ago, the media reports that 57 people died that day. It happens over and over. But eventually those deaths get reported to the CDC, and the CDC actually updates (with a lag) when the deaths occurred, in addition to when the deaths were reported.
* CDC and Covid Tracking Project reporting, July 11, 2020. CDC Data: “CDC table 1: daily updates in provisional weekly death counts” … Compilation @KyLamb8
The deaths must be increasing to some degree vs. more benign weeks of 5-8 weeks ago, but the reporting of deaths last week are not the reason one may believe that. In fact, 3,500 of the 6,600 deaths reported last week took place before May 2. I make no claims about what deaths will be reported in 2-8 weeks from the week we just had, but the claim that deaths from current spike are increasing lacks any empirical support.
I ran myself the average daily deaths from the COVID Tracking Project throughout April and May (when there wasn’t a backlog of data to be added to daily numbers), and see that we were averaging 1,615 deaths per day nationally. Now, over the last two weeks, the number is 589 people, and something in the range of half (or more) of those reports are backlog (and often backlogged “probable”) deaths. I reiterate, we can’t predict where it is going, but where it is even after six weeks of increased cases in the F.A.C.T. states is simply not in the same stratosphere of (a) What is being reported, and (b) What we experienced in the peak of March and April.
How distortive is all of this? Let me answer that with a question. Do you believe that Arizona is averaging 10x the new detected cases per day as New Jersey (which they are), yet they are averaging the same daily deaths now, as New Jersey reports “probable deaths” now from two months ago (or longer). Seriously – how can anyone formulate critical analysis from such a hodge-podge of unreliable data.
*Hold2 LLC, July 11, 2020
- News of yet more successful clinical trials for remdesivir were a factor in driving markets on Friday. Gilead’s now famous antiviral treatment reduced the risk of death by a whopping 62%, providing “significantly improved clinical recovery” for those in the trial. The phase three trial included 312 patients and compared them to 818 severely sick patients receiving just standard care. 7.6% of those receiving remdesivir died whereas 12.5% of those who did not receive the treatment died. 75% of those receiving remdisivir recovered by 14 days, continuing to expedite the hospitalization stay requirement. “This analysis importantly draws from a real-world setting and serves as an important adjunct to clinical trial data, adding to our collective understanding of this virus and reflecting the extraordinary pace of the ongoing pandemic,” ~ Dr. Susan Olender of Columbia University Irving Medical Center
- The “serious/critical” rate in the United States is now at a record low of 0.91% (less than 1%) – 15,819 cases out of 1,727,788. I will point out, though, that while the serious/critical cases have not gone up, it is because the total active cases have gone up that the percentage dropped. Regardless, that <1% rate is extremely noteworthy, and apparently not worthy of being noted anywhere else.
- And if I may, allow me to point out for the fifth or sixth time that, of course, the “active cases” are not anywhere near 1.7 million … Once a positive test occurs, the process for that case to be classified as “recovered” and taken off the “active” roles is murky at best, and totally unknown at worst.
- The data in London, Stockholm, and New York City all have something profound in common: Prevalance of cases reaching or exceeding 20% seems to lead significant burn-out in rapid order, in very similar patterns and timelines (within these three major world cities). A higher infection rate in NY vs. other U.S. states remains the most plausible explanation I can find for why NY has seen no case growth increase after their widespread protests and gatherings of 4-5 weeks ago, vs. other states where there was a minimal infection rate already baked in.
- I am more and more convinced (and possibly markets are, too) that the threshold for herd immunity in a practical sense is much lower than we previously believed. In line with the preceding paragraph, I commend this article to you, authored by the Professor of Genetic Epidemiology at Lund University and the Professor of Epidemiology at Umeå University.
- The 7-day average in new cases has slowed substantially, the lowest rate in over three weeks. New cases seem to have peaked in Arizona (yesterday was the first day in quite some time that Arizona’s new cases did not make the top four). Pantheon is targeting July 20 as the date U.S. cases will have peaked. I do believe it may be earlier, but I think there is legitimate reason to believe the peak in case growth is a week away. Beyond that I will be very curious at what the hysteria camp will use to maintain the present narrative.
* Pantheon Macroeconomics, July 12, 2020
- The weekend’s testing data shows over 729,000 tests done each day the last three days (all-time three-day record), with a positivity rate of 8.4%.
* The COVID Tracking Project, July 12, 2020
- 44 states put together are at 20,000 hospitalizations right now – in a country of 330 million people. Yes, there are 32,000 hospitalizations in the other six states. But I really believe that ratio is significant.
- Add India to the list of countries who have determined hydroxychloroquine is an effective treatment for COVID with minimal or no side effects. The early use vs. late use distinction appears to have tremendous scientific difference. 53 studies here – 32 of which were peer-reviewed. Science.
FACT (Florida, Arizona, California, Texas):
- I really don’t know what to do with the information but report it. 333 labs in Florida yesterday reported 100% positive tests (of their 3,528 combined tests). Well, since we know 100% did not test positive, it means they are reporting positives but not negatives). This does not alter the absolute number of positive cases, but it would bring the positivity rate from roughly 12% to roughly 8%. As of press time, I have not found or heard a counter to this revelation, but perhaps one is out there.
- One week ago hospital beds in FL were at a 74% use; today they are at 76%. First of all, in both weeks ~25% is a LOT of capacity … But more to my point, you all have heard the media coverage of this week, and no doubt, the case growth has been real (and their testing capacity has been incredible). So 2% growth in use of beds? ICU beds went from 77% to 79%? Perspective is key here.
- As you see in Pantheon’s chart and commentary above, and in the basic daily case numbers, Arizona feels like the F.A.C.T. state that is rolling over (in a positive way) first, with case growth not just flat-lining but declining as a matter of track-able and verifiable trajectory.
- The other metric I have watched over and over because I was told repeatedly that the issue is drain on medical resources, and that Arizona’s medical resources were at risk of being depleted – and indeed, their use of ICU beds and such all escalated to some degree in June – that is undeniable. But note the trajectory of the last three weeks (pretty long time – when all of these cases have been peaking and are now heading down) – they were at 88% ICU use three weeks ago and are at 88% ICU use now. Flat-line. Good news.
* Arizona Department of Health Services, Data Dashboard, July 12, 2020
- 38% of ICU beds in Orange County remain available. This is higher than a 12-month average of ICU availability. The change in average hospitalized patients has dropped to just +3.1% (it was over 10% a week ago).
- The San Diego data is fascinating to me. The hospitalizations are a bit lower today than they were a month ago, with rather significant margin before bed capacity, let alone surge capacity.
* San Diego County, Department of Public Health, July 10, 2020
- It is hard to look at data in a state as large as Texas only a statewide basis because one large county could be having a really bad problem while another county is not, and the blended data could look reasonable. That said, statewide, the hospitalization rate has begun to come down statewide, but not enough to make anyone feel great. The recovery rate is extremely high and the death rate is extremely low. Even after the events of the last few weeks, Texas death-per-capita remains amongst the lowest in the country. The positivity rate on tests is still too high.
- I have been tracking Austin hospital data carefully each day (partially because I have better sources there). I will note that available ventilators have increased by 200 since a week ago (which I assume is partially because they obtained new equipment). But more importantly, there were 550 people with COVID in their hospitals a week ago; there are 500 now. ICU absolute available bed count (even apart from surge capacity) is a little higher now than it was four days ago when the talk of overrun was escalating. In the three major hospital systems of Austin, hospital beds are at 77% capacity and ICU is at 88% (both are total, not reflecting just COVID but all hospitalizations and ICU cases). And in what I consider to be a crucial and significant line, “The hospitals declined to disclose how this compares to non-coronavirus operating capacities.” Why?
- 27% of COVID hospitalizations were discharged week-over-week in Texas. A better way of saying this is the number of discharges went up 27% versus the week prior, where the number of hospitalizations went up 26%. Of the total COVID hospitalized patients, 75% have been discharged as healthy.
As much as I need to see that every single life lost is a tragedy, and that includes the plethora of non-COVID deaths that were a result of things related to the lock-down, the perspective for markets seems to be more discerning than media headline writers. When the F.A.C.T. states are compared to New York’s peak awful-ness from March/April, I consider it an offense to the tragedy that took place in New York. At the peak, New York was averaging 51 deaths per one million population, per day. Texas is currently averaging 1.43, Florida 2.25, and California 1.69 – deaths per one million population, per day. This is not a twist on numbers to downplay anything – it is a basic mathematical reality to contextualize where we are as human beings, and yes, as we prepare for economic recovery.
** Worldometers.Info, July 12, 2020
Futures are right now pointing to a market up ~ +200 points tomorrow.
I thoroughly enjoyed being on Maria Bartiromo’s morning show on Fox Business Monday talking government intervention to equities, and “shareholder capitalism.”
My thoughts and prayers are with anyone suffering this week medically, and with all economically struggling from what this pandemic has produced. I don’t say that for any other reason than it is true. May we see progress in the days and weeks ahead, make smart decisions, and at the very least, if it is not too much to ask, as a bare minimum, at least hope for good news …
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.