The Dividend Cafe - Covid and Markets - Tuesday September 8

Episode Date: September 8, 2020

The market dropped for the third day in a row, again led substantially by the sell-off in big tech (the Nasdaq is down 10% since last Wednesday’s late day high). The Dow is down ~1,600 points since mid-week last week, about half of the drop in the Nasdaq in percentage terms. Futures were pointing up ~200 points last night, but today the market opened down 400 points and chopped around throughout the day, taking two turns down in the final two hours of trading. Expect a bit more markets and economic coverage in this week’s missives than normal because the Friday Dividend Cafe will be exclusively focused as the special election issue. We are entering a new phase of the COVID economic recovery that I believe will move slower than the first half has moved. A lot of the low-hanging fruit of job recovery and activity-resurgence has taken place, but normalized conditions are a ways off and will likely see a slowdown in pace of recovery from here. COVID Health Information • I am sure the Labor Day report of just 27,000 new cases yesterday was low around holiday reporting issues. The 7-day moving average is dropping ever so slowly. • The 7-day rolling average for daily mortalities is down 12% from the week prior and down 22% from a month ago. • The leaders of nine major pharma companies, all engaged in leading vaccine efforts, sent a public letter vowing to take no shortcuts en route to a COVID vaccine. • Incredible news (I will keep this updated as long as Dr. Bostom keeps maintaining the source report): 26,000 alleged COVID positive cases on college campuses now; 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. Hello and welcome to today's COVID and markets podcast brought to you by the Dividend Cafe of the Bonson Group. We had our third day in a row of a sell-off in the market, again, primarily led by the tech sector and the NASDAQ. NASDAQ was down over 4%. The Dow was down just over 2%. S&P somewhere in between.

The Dow is down 1,600 points since the middle of last week, which is about half of the percentage drop that the NASDAQ has seen. The NASDAQ is now down 10% since its high of last Wednesday. And keep in mind, of course, yesterday, Labor Day was a holiday. So you definitely are getting a bit of a tech correction. I just want to remind everyone that the NASDAQ is still up 55% from its March bottom and still up 21% year to date. So you can either look at this as still kind of encouraging sign of strength, or you can look at it, there's an awful lot of room to go still. All kind of depends on your perspective. I'll have more on this kind of growth tech

versus value sort of discussion here in a moment. Let me get into the COVID stuff and then we'll go around the horn. Kind of a lot to chew on today. Look, Labor Day report, there were only about 25,000 new cases yesterday. And so you could chalk some of that up to Labor Day reporting issues. But then even today here, it's looking, I don't know the final number yet, but it's looking to be

quite low again. And so there's no question that the case reporting has definitely dropped. So there's no question that the case reporting has definitely dropped. In terms of the seven-day moving average, it hasn't dropped a ton, but it's moving slowly. And on a per-day new case level, it's the lowest it's been in quite some time. The bigger issue to me, though, is just the positivity rate continues to drop. And I'm not sure how that can happen. And the folks that are concerned about lower testing levels can stay concerned. It would seem to me at one point, at some point, the lower positivity rate is sort of telling you why the testing rate is going lower. That is, there's less people that are infected

with the virus and, of course, less symptomatic. And then, of course, with the RT rate, the so-called reproduction rate dropping as well, then you have less infectiousness. And so I think it puts a little bit less that burden on the testing side. But I do understand as well that you want enough data to be able to confidently say so. So we'll continue to kind of watch all that. But let's see here. Where else do we want to go with this? Daily mortalities on a seven-day rolling average are down 12% from the week prior,

and they're down 22% from a month ago. So we're well past that moment of, yes, cases are dropping and hospitalizations are dropping, but the deaths are still going to be picking way up. That didn't happen, and it's not going to happen based on the data that we we now have i put a chart up at covindermarkets.com showing you straight from the cdc website all of the covert-like illnesses that have proven to me from my analysis to be the best leading indicator of various other metrics whether it be be hospitalizations or ICU or mortalities. And you look at the kind of collapse really since the middle of July and people going to

emergency rooms with shortness of breath or pneumonia or flu-like symptoms or things of that nature. So really good stat there. Speaking of flu-like, did you know, I just am sharing this anecdotally, I didn't know, Sweden had more deaths from the flu in certain months in 1993 and in the year 2000 than they did from COVID in the months of 2020. Interesting. The leaders of all nine major pharma companies that are engaged in various vaccine efforts and a public letter vowing to take no shortcuts en route to a COVID vaccine. So there's a whole lot of politicking and stuff going on about this and that. And I don't really have much else to say about it. a leading sponsor in this University of Oxford study, came out today and said they're delaying some of their vaccine trials in the States on the possibility of an adverse reaction to

one participant in Europe. So they're waiting to get more information. They haven't provided a lot of details on that yet. I have an updated chart from Dr. Bostom on the COVID cases on college campuses now up to 26,000 alleged positives and it has the actual data of what's been reported as positive cases across each reporting University and it's 25,941 and accompanied by zero reported hospitalizations zero let's see here in terms of Florida 1,800 cases reported today 1,800 cases reported Monday Labor Day 2,600 on Sunday so you're really looking now at around 20% of the case growth that they were experiencing about a month ago. In California, the positivity rate in the whole state today was 2.4%.

The two-day average is at 2.6%. you know, less than half of the national average. They did move on the state website, Orange County, into the red category, which is downgraded from the purple category. In case you don't know, purple is considered worse than red. But Orange County has to hold red for two weeks before it means anything, so we'll just sit tight. You may have read a lot, heard a lot about the motorcycle rally and things in South Dakota. There are currently less than 70 COVID patients in the hospital in the entire state of South Dakota.

70? I didn't know that. So I just found that out today and thought I'd share it with you. It will be interesting if a return to work dynamic picks up in Manhattan. You know, I've been here off and on for a couple months and seen a very slight pickup. And now you have some schools that have restarted. And, you know, I expected a Labor Day would begin to, you know, be a milestone day. And then schools are scheduled to start up again September 21

citywide but I did read this morning that the largest financial employer in the city is now asking they were supposedly around 25% of their investment bankers and deal teams that they had back in the office they're upping that to 50% so it would be curious to see if you see more white-collar jobs coming back into work and what the economic impact on that will be. On the stock market front, the trend line, this is a very important chart in COVID and markets.com today. Just so you can see the violence of the move higher in so-called growth's outperformance over so-called value in

the last few months. It had been outperforming for many, many years on a certain trend line. There were a couple of years where value had really outperformed growth, 2016, 2012, and this is all in the chart. But then you just got this sort of hockey stick move higher. in the chart. But then you just got this sort of hockey stick move higher. And so I think that to kind of get a look for what a reversion of the mean may entail, the chart is really helpful. I encourage you to look at it. No new news on a skinny stimulus deal other than just the U.S. Senate GOP majority is still working to piece together their 51 votes. I continue to be really focused on, from a policy standpoint, where some of the China talks may go.

I don't think the market has really thought about it much. On the oil and energy front, I'm seeing a total sprint for drilling permits on federal land from many oil producers, New Mexico, West Texas, Oklahoma, in advance of the election and fear that there may end up being a ban on drilling permits granted on federal land post-election. WTI crude, by the way, has come down to about $37 a barrel. It had been in the low 40s a week and a half ago or so. So it's had a little stint due to the downside.

On the housing front, we know interest rates being lower, suburban demand have all kind of been a boom for housing prices. I think right now, some of the factors that are most certainly due to provide a diminishing return are up against the supply, demand, and balance. You just cannot balance the market without more supply. And I think that lower inventory serves as a bid up for house prices. Now, I do not say that as a bullish thing, because I've never been one who thinks that unaffordable housing is a good thing for the economy. It's a good thing for people who are selling their home. But I think that ultimately getting a balanced and organically healthy market where prices reflect natural supply demand trade-offs is a good thing.

And right now, I think that that inventory is very low. And there's a really good chart at COVID markets on that as well. Big pickup in TSA, Traveler. When I say big, we still are not even 50% recovered, but we're getting there. We still are not even, you know, 50% recovered, but we're getting there. And certainly in this last week had the biggest move higher and what is sort of gyrated slowly but surely up as far as TSA actual traveler count since late May. We made big progress and we have our biggest week to the upside last week that we've had.

Presumably people heading back from wherever they were for summer. Maybe back to school, back to work, things like that. So that's the lay of the land here in COVID markets. We'll have another report for you on Thursday. Please reach out with any questions and we're going to continue to try to provide all the data we can. I've been pretty clear.

I think the narrative I expect next is going to be around college campuses. But so far, it's not just that we're not getting a lot of hospitalizations. Kids going back to college, we're getting none. So I don't see what they do with that. Okay, thanks for listening to COVID and Markets at the Dividend Cafe. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC. at the dividend cap. This is not an offer to buy or sell securities. No investment process is free of risk. There is no guarantee that the investment process or investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.

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