The Dividend Cafe - Covid and Markets - Thursday September 3

Episode Date: September 3, 2020

COVID Health Information • Confirmed cases in the U.S. are running about flat this week to last week, which leads some to say, “oh good, cases are not further increasing,” and it leads others to say, “see, the rate of decline has flat-lined.” It would seem to me that neither posture is the most astute given all we have learned, particularly in the context of applying COVID to our economic and market and societal realities. But as long as the focus is wrongly put on cases versus the other metrics we have learned are more systemically significant, that debate will likely continue. • If one were inclined to earnestly follow the case growth numbers, though, and I certainly provide them here (despite my insistence that they are of little use I still play along), it would be noteworthy that while case growth has flattened, testing is actually up 6%, with the positivity rate is down to the 5-handle we were waiting for. In other words, adjusted for testing, cases are continuing to decline. • If there is one “prediction” I can offer here (and if there is anything NO ONE should be doing around COVID based on the last four or five months, it is making predictions), it is that we will see cases on college campuses in the coming weeks – cases that will create little or no hospitalizations – result in the next round of headlines and hand-wringing (and everyone can decide for themselves if such will be justified or not). P.S. – 546 positives art University of Kansas – zero hospitalizations; Ohio State University 882 positives, zero hospitalizations. 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 Dividend Cafe. This is David Bonson, and it's quite a handful today, but unfortunately, I just have to get you the missive at covidmarkets.com for the kind of long form version, because I'm not going to cover everything in the podcast that we have at the website. But the main thing, just to start, I was really thinking this morning, it was going to be a real heavy COVID day. I have a lot of links and stories and anecdotes and data. And then the markets were kind

of boring this morning, but then ended up being a pretty good little sell-off in the markets today. So we'll have to cover that a little bit more than the COVID side. The Dow ended up down a little over 800 points on the day. It had been down over a thousand. That's 2.7%. But the NASDAQ dropped over 5%. S&P was down 3.5%. So it was essentially a pretty big sell-off in tech. And then that kind of rippled through markets. The market started off flat and stayed kind of just fine, a little up through the first, I guess, half hour, a little bit more than a half hour of trading. Then it began to decline.

Then the decline kind of accelerated. Then it stayed level throughout the day. And it did kind of rally a couple hundred points at the final half hour. The issue around this is, of course, the heavy index fund ownership of stocks. These big tech stocks are so heavily owned that you just, whether it's in a rally to the upside or a sell-off to the downside, you inevitably get a bit-off to the downside, you inevitably get a bit of built-up momentum either buying or selling because of the self-fulfilling prophecy of a stock price dropping, meaning more of it has to be sold so it drops further and vice

versa. And I think you saw that effect today. And then as it trickled through broad index funds, it led to other stuff being sold off. But ironically, a few things actually kind of doing quite well. So it was a weird day because the bulk, you know, everything was sort of down, but the bulk of the downside was definitely in big tech. And then there were some things that really were surprising that how little they were down, if at all. So we'll see where markets go tomorrow, and then, of course, we go into the three-day weekend. So as a general posture, we'll know as the trading comes to close Friday,

are traders looking to go into the weekend risk-off? Are they looking to go into the weekend with fear of missing out and therefore leaving positions on over the long weekend because Monday will be closed for Labor Day. The confirmed cases in the U.S. for coronavirus are flatlining kind of week over week, pretty level. So there are folks who will say, oh, good news. Cases are not increasing further. Others will say, oh, this is not good. They're not declining more. The decline is slowed. I think both postures are wrong because what it does is it continues to acknowledge that there's this importance around the case levels. And I don't

agree with it. I think that the severities have got to be what we shift our data calculations to, The severities have got to be what we shift our data calculations to, the hospitalizations, the ICUs, and, of course, the mortalities. And you see a good portion of the positive cases now coming from the college towns. You have Ohio State University has reported a total of 882 positives and zero hospitalizations. The University of Kansas reported 546 positives, zero hospitalizations. University of Kansas reported 546 positives, zero hospitalizations. Alabama's got a very similar number. I think it's above a thousand there. And again, you know, we're not getting the types of cases. Some of these may be completely asymptomatic. Some may be mostly asymptomatic, but what they aren't is requiring medical attention. And therefore, it's really hard to kind of figure out, well, I'll leave it there. It becomes

a different policy matter. It becomes a different data matter altogether, as you can imagine. I have a lot about the European second wave today. I have second wave in air quotes, but regardless, you have 1,750 new cases reported in the United Kingdom, as an example. They have a country of, by the way, 67 million people, and you had one death yesterday. Italy has had 600 cases per day for several weeks, if not a month, and has averaged four deaths per day. So both countries saw an uptick in cases late summer, just as we saw an uptick in cases in the United States earlier in the summer. And yet the mortality rates of March and April are long gone. So are the hospitalizations, ventilator use, the severity level. The cases switched to younger population.

And yet, I think that we've held on to crediting a better treatment as a reason for less mortalities. But in this case, these cases aren't even getting to hospitals, okay? So to me, it can't be better treatment if they're not even having to get treatment right um so then i think that increases the odds of a potentially less lethal uh virus strand that is circulating but i have no way to validate that and so i think more and more evidence is indicating i have a report to this effect, medical journal in COVID today, that a lot of the positive testing is capturing viral particles and not a whole virus, not capable replication, not likely to create a damaging COVID in the person who's producing the positive test.

There's a lot of work from Oxford's professor of Evidence-Based Medicine. So this is one of the premier research universities in the world. And their scientific medical school providing a lot of work in this vein around the understanding of how PCR tests are affecting, what they're capturing and what they're not and what we need to do with that data. By the way, Massachusetts yesterday determined that 7,757 cases they had previously included in their positive tally were not, in fact, positive COVID. But what they did is they just didn't count them in the numbers. And that's fine. They just sort of took it out so it wouldn't skew yesterday's data. But see, they did report those numbers previously. And this is a point I want to make that I've seen time and time again, is I've studied data all over the country on an individual basis. These data anomalies may be unavoidable. I don't have any conspiratorial

theory or anything stupid like that. That's where they come from. But yet, I still think on a basic mathematical level, we have to understand that there is some bad news going in and there is not good news coming out when these things get sort of self-corrected. I think that's pertinent to the way we interpret some of the data. By the way, Pfizer announced that their late-stage vaccine results will be available next month and that if those results are positive, that they will be immediately filing for emergency use authorization. No surprise there, but wanted to mention it. As of right now, I don't have the positivity rate on the day. We've been sitting in the 5% most day in the daily Johns Hopkins numbers, and we'll wait for that data to come in here shortly. And we'll wait for that data to come in here shortly.

But, you know, as I said, really what we're facing is primarily day by day improved numbers. But if we're looking at cases, it's kind of flatlined. And then the severity looking much better. More and more talk about whether or not they're going to get a deal. No more action on the public policy front regarding a forced stimulus. Chuck Schumer coming out saying we really need something big. Mitch McConnell coming out saying we really need something small. And so everyone's playing chess, and we'll see what happens. I think that the CDC issue, the Center for Disease Control,

issuing a national edict that landlords cannot evict for failure to pay rent, it strikes me as somewhat political in terms of generating leverage around trying to get a stimulus bill, as it doesn't strike me as a particularly medical maneuver. And so we'll see what comes of that. I got to leave it there. The August jobs report comes tomorrow. Today was only the second day that initial jobless claims were below a million. In fact, they were 880,000, which was even 70,000 lower than had been projected. Continuous claims down another 1.2 million. So broken record. Better numbers than expected, still bad numbers. And that's where I have to leave things as I run to my next meeting for today's COVID and Markets podcast.

We'll be back to you tomorrow with a full weekly Dividend Cafe commentary. And we hope you will check out COVIDandMarkets.com today for a fuller report. Thank you for listening. The Bonson Group is a group of investment professionals registered with Hightower Securities report. Thank you. and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice. This document was created for informational purposes only. The opinions expressed are solely those of the Bonson Group and do not represent those of Hightower Advisors LLC or any of its affiliates. Hightower Advisors do not provide

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