The Dividend Cafe - Covid and Markets - Thursday September 24

Episode Date: September 24, 2020

The market had been pointing to a modestly positive opening all night and into the very early morning futures action, but around 5:30am turned south, again led by technology. The market opened down 250 points, and then went up 500 points (so up 250 on the day), and then bounced around throughout the day. It closed up just +50 points or so with all indexes about the same on the day in percentage terms. The timing of the downturn this morning came right as the weekly jobless numbers came, but truth be told there was nothing unsurprising at all in the jobs data, so I doubt that was related. More or less, I think the markets are zigging and zagging because that is what they do – and notoriously so this time of year. I do not expect anything different for the next couple of months. Lots and lots of COVID info today, and plenty on housing etc. — off we go! Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Well, hello and welcome to today's COVID and Markets podcast brought to you by the Dividend Cafe of the Bonson Group. This is David Bonson. I'm the Chief Investment Officer here at the Bonson Group, and I am so very excited to be bringing to you one of the very last COVID and Markets podcasts that I intend to do. We are announcing day by day more and more of our plans, but I'll tell you all here on the podcast who

maybe don't necessarily read the missive that we put out for a long time, every single day. And then now lately, we've been doing it three days a week. And my plan now is to go to a daily market missive online at thedctoday.com. It'll start next Thursday, one week from today, October 1. today.com it'll start next thursday one week from today october 1 so we will have another covid and markets podcast for you next tuesday but it is my belief as i intended uh when i first started the daily covid markets.com uh you know kind of you know daily written comments and charts and data and analysis and so forth, particularly around all the enhanced market volatility of that COVID moment in March and April in the belly of the quarantine, that I very much wanted this to be a temporary phenomena. I think that we

are very much in a period of time where markets are going to continue being markets, very volatile, very uncertain, things that make them go higher, things that make them go lower. But that intensity of pressure and uncertainty around the coronavirus, I think, has long since subsided, which is not the same as saying it's not still a serious thing, or that there's not still people who will be infected, people who, God forbid, but also people who will end up dying from this virus. To the extent, though, that I believe a lot of the uncertainties and unknowns of March, April became a little bit more known and understood shortly thereafter.

And then now it's impacting the markets, it's impacting the economy, it's impacting the public policy, it's impacting the Federal Reserve, it's impacting the energy, and it's impacting the housing. All the categories I've been focusing on in this podcast and this missive, I think we're ready now to still continue addressing those things. And in fact, to be doing it every day, I intend to do a really succinct, but hopefully very robust and informative market recap every day, covering a lot of those same subjects, including covering COVID, where there is COVID news to cover. But what I don't want to do is what I fear this missive has lately been turning into is a repetitive and redundant restatement of data points day

after day that are all largely indicating of the same type of thing. And that is that there's a lot of people who are testing positive for the coronavirus. As a percentage of certain states and populations and things, it's not a very high significant number, but as an absolute number, it's a a very high significant number. But as an absolute number, it's a lot of people. This is still a highly infectious disease, a lot of community spread. But that systemic risk of overwhelming the nation's hospital system is long past. And the ability to contain, the ability to focus mitigation efforts on the most vulnerable in our society is right now where things stand and they should stand. And so I will continue when I think there is something profound around a

vaccine, around public policy, around therapeutics, needle moving news. I still want to cover it. I couldn't not cover it if I tried. I just am very attentive to these things, and I've spent more time in analysis of epidemiology and things like that over the last few months than I ever wanted to in my life. But I do think that at this point, I am at risk of repeating the same thing day after day. I don't want to do it anymore.

So I hope that that is understandable, and I hope that the new web property, the dctoday.com that we are coming out with will really float your boat and give you a lot of good information for those who want to follow these things. Also, by the way, I mean this real seriously. I hope there's a lot of you who don't read it. And what I mean by that is there are people who have no interest in staying on top on a day-to-day basis of what's happening in the market and the latest from the Fed and the latest in DC and those type of things. And you notice the DC today, obviously we're trying to go for a double meaning around DC.

Obviously that nexus of money and politics has always been near and dear to my heart, but also the Dividend Cafe, which is our main weekly commentary message that I've done now for many, many, many years. The DC Today may not be of interest to a lot of you. Maybe we're really interested in COVID. There was a lot of public policy ramifications. There were health ramifications. There were questions for your kids and grandkids and schooling and work. Is the economy going to reopen? And for some of you, when you can go back into the shopping centers and the fitness gyms and all that kind of stuff, right?

Look, all of that I get. And to the extent there's more needle moving news on it, I'm going to cover it. But then on the other side of this, you may not be interested in day-to-day moves in what Chairman Powell said at the Fed or tax policy or how much the NASDAQ went up or the Dow went down or whatever. And that's okay. I do really believe that there's a significant part of the population, including in the roster of clients that the Bonson Group is blessed to manage, that they hire us so that they don't have to think about or even look at what the market's doing day by day. And so I get it. But there are some of you that I think

benefit from it, enjoy it. We want to continue trying to add value where we can, providing that information. And now that I have developed this habit of writing these things daily, I'm not going to get rid of that habit. So I may as well turn it into something that I think is going to be more valuable and meaningful to clients. So we hope you'll enjoy the new property. With that said, I will jump into a little crazy day in the market. We haven't had one of these in a little while. Futures were kind of up a bit last night when I went to bed. I think I probably was asleep earlier than normal because I had flown from New York to California yesterday. But all I know is I was up very early than normal because I had flown from New York to California yesterday. But all I know is I was up very early this morning and futures had gone from being modestly up to still up a little.

And then around by 530, they turned south again. And the technology sector in particular was really down. So that reversal in futures from when I first got up to a couple hours later, it did happen at the same time that the weekly jobless numbers came. But I got to say, I actually don't think that's why. And it's always a little tricky. If something happens, news comes at 5.30

and the market changes to 5.31, I do get why the natural assumption would be that the thing preceded it caused it, but I don't think that's the case. There was nothing really in the weekly jobless numbers that was surprising. It was all pretty much as expected. And none of it was great, by the way. I mean, the numbers aren't getting worse. They're just not getting meaningfully better. And there's sort of a flatlining. And I think that speaks to the high degree of people in those deciles of wage earners in those sectors of the economy, where there are not jobs come immediately back around the

continued kind of inability to get the economy at full steam. But then, so the market opened down 250 points, and then a couple hours later was up 250 points, you had a 500 point intraday swing, and we did close only up 50. So you kind of dropped a bunch, you went up a bunch, and you kind of met in the middle, and there was a lot of moving and shaking along the way. Now, this is still tame volatility compared to the good old days of March, said tongue-in-cheek, but it is certainly much more volatile and intraday volatile than we've been used to as of late. All in all, though, September has been a pretty difficult month for markets.

We were very due for one after April, May, June, July, and August. But here in September, particularly in the NASDAQ, it was down over 12% from its early month high. S&P even got down 9.8% from its early month high. It was up a little bit today. And by the way, those numbers I'm using are from intraday high points, not necessarily from closing high points. So that makes a little difference as well. But yeah, it's been a volatile month and a lot of that fluff has had to come out of the technology sector. On a health basis, here's what I would say. There's really nothing that I can do. I don't think there's anything any of you should do about the onslaught of media coverage that I fully do expect we're going to get for, I'm going to guess somewhere around maybe

five to six more weeks about new cases surging and second wave and so forth. Look, I am totally open to the idea that I'm wrong about this, but I'm pretty sure it's coming. And I don't think it's coming in terms of a real health change or a substantive data metric. But I think that in the absence of a real hospitalization problem, real ICU problem, real exhaustion of medical resources, obviously a real catastrophe of growing mortalities. I think that the cases will be a number that needs to be focused on. And there seems to be kind of a rotation of media coverage. And this is where I expect that media coverage is going to rotate to. And testing is very high. And I expect that, you know, there is a real business model benefit for media to maintain some form of

panic or sensationalism or whatnot. Markets, I think, have plenty of other things to worry about. Okay. They've been pretty numb since June to the reality of case growth with coronavirus. I think that the need to live with COVID cases and some of its accompanying risks pre-vaccine have been well-baked into markets for good and for bad. But I will say that from the media standpoint, I expect to see the story continue. And there's been a few other stories in the way this week. Now, with that said, there are two of my favorite charts I've ever, ever, ever posted in COVID markets today. And one of them is one of the reasons for that is that both these charts I took directly from the government's website, directly from the CDC. They have both a COVID view section and a COVID data dashboard. I think they call it COVID data tracker. And I went and looked at the hospitalization rates. They did it by age group,

so you could actually see the decline, you know, real young people, older people, what have you. But the point being, you have just this really significant move down in the average hospitalization levels across each age group. And yet there are stories about, oh, hospitalizations are going to pick it up again. And there's an analyst I've followed very closely through this whole period that I really am very frustrated by right now as I think he's kind of moving forward with a certain kind of panic level about certain things that is just not there in the data. Talking about, oh, well, you know, hospitalizations might be moving higher. They're not moving higher. The data doesn't show they're moving higher.

hospitalizations might be moving higher. They're not moving higher. The data doesn't show they're moving higher. And then I don't really know for the life of me how, if indeed the hospitalizations are moving lower, the mortalities are going to move higher. I mean, obviously, you can understand the logic of that, where people are, God forbid, passing away from coronavirus. They're mostly doing so in a hospital. And so I certainly hope that that trend continues. I'm not so much making a prediction about whether the trend will continue or not. I'm more just saying where it is and the facts are what they are. Now, why do I feel confident that hospitalizations aren't going higher? It's pretty logical why I would feel mortalities aren't going higher if hospitalizations aren't. Why do I feel confident that hospitalizations aren't going higher? Because the percentage of emergency room visits from what they call CLI, COVID-like

illnesses, whether it's shortness of breath, pneumonia, flu, those numbers have totally collapsed and trajectoried down. And so I just am kind of following the chain of events, sequence of events that we've experienced here over the last couple of months. There have been a few back reported cases that have hit the data over the last couple of days. I'm not going to worry about that. There also have been some back reported mortalities. You had Florida reporting like nine mortalities in a day and 20 mortalities in a day, like much lower numbers. And all of a sudden it got up to like 170 again or 130 or something. And you look at it and, you know, a bunch were in May, June, July.

I mean, really old reporting, 90% were from older backlog reporting. And so that's why I think I'm kind of, you know, guilty of the same thing I'm condemning others for, to continue sitting here every day talking about those numbers, when I think that story has largely gone away, at least from like a data analytics standpoint. Well, here's a data analytic point that I think is worth mentioning. 2,000, excuse me, 2,549,641 active cases in the United States of coronavirus right now. And of that, 14,059 are classified as severe, as critical or serious. Okay. That's exactly half of 1%. I've been covering this category for a long, long time. I can tell you in past months, that percentage number was exponentially higher as a percentage. Now, first of all, I don't really believe that we probably do have 2.5 million active

cases. I've never since March been able to understand the process by how a case goes from active to inactive. I don't really think they have a very systematic way down of when someone who gets better from coronavirus, which is 99.8% of people, how that gets classified as inactive. I think there are people go back and get a negative test and that gets reported and that's all good. But yeah, I would imagine there's plenty of people in that two and a half million of active who no longer have symptoms of COVID. But either way, the point being that that severity case divided by whatever the

active denominator is, it's extremely low. And I'm really grateful for that. I'm sure all of you are as well. Johnson & Johnson's the latest of the major vaccine programs to go into late stage trial testing. It's surreal that there's not one, not two, not three, but four major vaccine potentials that are all the way through into late stage trials. Some of you understand the way this works, know how rare that is. And the fact that the first and second stages and different levels that they had to go through to get here did not boot them out is very encouraging. So we have Moderna, Pfizer, the Oxford program, which is in joint venture with AstraZeneca, and then now there's Johnson & Johnson, all in final stage trials. Much of the optimism, by the way, around Johnson & Johnson's treatment

is a byproduct of their success with similar technologies already in the market for an Ebola vaccine. But the prior trials they've done here for this COVID vaccine candidate had phenomenal success with both non-human primates and hamsters, the animal testing phase. And then now the company has shared that the immune response in humans has been very comparable to what they've already seen. So it goes forward. I have a chart at COVID markets of all the major vaccine players, what dosage would be required, how it has to be stored, which is a big relevance to the production and distribution side, and just other comments on what to expect. So we're hopeful on that front.

So we're hopeful on that front. A couple of different new studies regarding how well things are going with kids back in school. A really fascinating study, peer-reviewed science white paper on increased exposure to young children, decreasing risk of testing positive for COVID and what those numbers kind of looked like and what they mean, particularly lowering the severity of cases when someone does get infected with COVID. Somehow being in a household with kids around has lowered that risk. And there's a number of factors, mostly medical, but also a little sociological that might be of interest. Chart from CDC on date of death reporting. And then, of course, you know, the just ongoing testing. Yesterday's numbers on our testing, we got up to 850,000 new tests done again.

And again, a positivity rate about four and a half percent. So plugging away. By the way, I would point out California, some pretty big companies now joining the fray, wanting to get reopened. Not just your gyms and hair salons and churches, but even the happiest place on earth. So I've already talked about the stock market. Oil staying in around $40. Really fascinating stuff on housing. If you're listening to the podcast and all you wanted to hear was what I have to say about the housing market, then I'm going to leave you in suspense. Go to covidandmarkets.com. I am eight minutes late for a meeting I need to be to.

It has been my pleasure to bring you this podcast. There is going to be another COVID and Markets podcast next Tuesday, September the 29th. In the meantime, look forward to bringing you Dividend Cafe tomorrow, Friday, and reach out to the Bonson Group anytime with any questions you may have. Thank you for listening to COVID and Markets brought to you by the Dividend Cafe. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, with Hightower Advisors LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Advisors LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC. Advisory services are offered through Hightower Advisors LLC.

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