The Dividend Cafe - Daily Covid and Markets - Thursday August 20

Episode Date: August 20, 2020

The market was up ~50 points today with the S&P and Nasdaq up higher than the Dow on a percentage basis. Markets had been down last night in very late night futures ~200 points, allegedly on Fed comments regarding yield curve control (please). Then markets evened up, allegedly on reports that China trade talks were re-scheduled (please). Then markets dropped a bit after the weekly jobless claims came in worse than expected (maybe). And by the end of the trading day, markets had grinded out an up day, and big tech led the way. The weekly jobless claims number came in at 1.1 million, far higher than the 960k we got down to last week and the 925k expected this week. Continuing claims, though, declined by another 636,000 though, bringing that number below 15 million. 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. This is David Bonson. Thursday, August the 20th, we continue to trek along. Let me go through some markets action first and then we'll go around the horn. The Dow was up 50 points today.

The S&P was up more than that percentage-wise, and the NASDAQ was up more than that percentage-wise. Big rally from big tech today. But I don't know. It's not super significant, but the futures were actually down 200 points last night late. It's been a while since I've seen late-night futures down. And then this morning they had rallied back a little bit on word that apparently a China trade discussion was back on. It had been canceled earlier in the week. Then the weekly jobless claims number came and

markets went down a little further. And then throughout the day, just kind of, you know, grinded their way back up. And like I said, on the NASDAQ side, big tech had quite a big day. So there you go. The weekly jobless claims came in at 1.1 million. And you recall, we had dropped below a million last week. So that was a step in the wrong direction, and the markets didn't like it for about five or ten minutes and then ended up shrugging it off. The continuing claims, though, did decline by another $636,000. So that brought that number below $15 million. So for those keeping score, we were above $25 million in continuing claims. This is when someone's filed two weeks in a row of weekly unemployment.

And now we're down below 15 million. So presumably there are over 10 million people who are out of work who have gotten work back in some sense. PPP could be a big part of it. There's still over 14 million filing in that regard. So there's high unemployment, but much lower unemployment than we were. And that's sort of the trend that we're seeing. The COVID side of things today, there's just a couple of things around the horn. I do think a nice little summary chart going back since May is available showing the growing new testing. And then we did have at the beginning of August, a little decline in the new testing. And I'm quite convinced now at the time, I wasn't sure, but I feel much more

confident now in my belief that a lot of that is just related to people not needing to get tested because there was a lot less symptoms, a lot less symptomatic cases. And because there's less COVID, there's less people getting tested for COVID. And it strikes me as entirely logical. And it's a better scenario than if people were not getting tested because of lack of access to testing or something like that. people were not getting tested because of lack of access to testing or something like that. And in the meantime, you do have a continually declining positivity rate. The positivity rate had collapsed and was looking really good at the very early part of June, even as testing was increasing kind of from late May into maybe the second week of June. And then that's when you sort of broke apart. But then you did get to a point where the rise in new positives was in direct concert with the rise in new tests. And then now we've gone the other way, more testing and lower positivity.

That's what you want to see to the extent one's focus is on positive tests. My focus has been from an economic standpoint and a severity standpoint to evaluate the big picture of where things could trickle into markets and where things could have some more severe ramifications to the society has been on hospitalizations and equipment and, of course, mortalities. Those numbers have stayed in a much different place all summer, as we've talked about repeatedly. In Florida today, we have 4,500 new cases, continuing collapse in the hospitalizations. And I don't know why I haven't looked at this in a little bit, but after the whole summer situation, and obviously Florida did have an increase in the absolute number of mortalities, but never close to the proportionate increase that many had predicted.

But after all of the cases, and now their mortalities have just totally dropped off at less than half of where they were running a couple weeks ago. They're 16th in the country in mortalities per capita. So I think a lot of what had been feared and predicted out of Florida never came close to coming to fruition, thank God. New York City, by the way, yesterday had a 0.24% positive infection rate, 0.24. So, you know, for a lot of us, that's pretty close to zero. And their indoor restaurants are still not open.

Yet the New York City Hospitality Alliance is reportedly getting ready to file a suit against the state and the city over the indoor dining ban. And there's 27,000 New York City restaurants that are on board with that. So it'll be interesting to see if there's action that gets the restaurants reopened. In Arizona, I don't want to just keep saying the same thing every day. So we know the hospital numbers are so, so, so much better. But I will say that they're better in a way a lot of people wouldn't have even predicted. will say that they're better in a way a lot of people wouldn't have even predicted. They actually now are at a lower hospital usage than they were any time all summer and have more available hospital resources and beds than they did before COVID even existed. So their management of hospital resources has just been something to behold.

When we come into California, I'm going to start with Orange County, where the Bonson Group's headquarters are in Newport Beach. You have, for the first time, all five of the metrics that are required are not only beat, but beat substantially. But then the California Department of Public Health has said that they need three days to get their website to be tracking with Orange County's website. And I presume that's because we still don't have computers that can talk to each other in this country. So maybe one day someone will invent like a modem or the Internet or something that can make this happen quicker. But in the meantime, California, excuse me, Orange County's metrics should have started their clock.

And I know Riverside County has reached out and Governor Newsom gave a press conference yesterday. I was somewhat encouraged by that. It does sound as if he is realizing that loosening some of these restrictions is going to start to be rather necessary. So good news across Florida, Arizona, California. And with Texas, the cases have dropped substantially. The positivity rates dropped substantially. The hospitalizations have dropped quite a bit. They have not dropped at the same percentage level that they have in Florida, Arizona,

but they've dropped a lot. And then, you know, in terms of the mortalities, they continue to decline. So to the extent that there isn't this other kind of surge of waves and whatnot, obviously, we've seen that peak fatality level as well. And you have to be encouraged by that. On the public policy front, Speaker Pelosi said something for the first time Wednesday in hinting about the willingness to maybe do a smaller deal uh for that fourth stimulus and specifically said the words willing to cut our bill in half uh they walked that back a little bit after the fact the point being it does sound as if some uh compromise could be potentially getting set up um i do think there's more and more talk about a revamping and reloading of PPP for small business aid that could get done as a carve-out deal. I have a particular source who's big on the fact that this is being talked about behind the scenes.

That would be very useful from the small business side of things, even if they can't agree to state aid and so forth. And so I'm more and more of the opinion that this isn't over yet, that there could end up still being a deal, but it probably could end up being a skinny deal or a carve out deal, not a massive one. And part of that may be that Democrats think that if they're going to win well in November, they can get a bigger one later. And part of it may be that President Trump thinks he's been able to have this skirt a little bit to his advantage by doing the executive orders. So you not only have the politics, but you have the perception of the politics that's kind of driving it. WTI crude oil still remaining up very close to $43. You had another 1.6 million barrel draw of inventories yesterday.

Three weeks in a row of a rather significant draw rather than a build in the inventories. OPEC Plus is meeting discussing the status of their production cuts. And there continues to be talk, it's just talk right now, but talk of China substantially increasing its imports of US oil and gas. In the housing side, you may have heard mortgage rates have ticked up a tad. It is true, but I do think that's much more to do with the fact that there's still ongoing very heavy demand and there's not the capacity to meet the demand. So if the loan companies can't get everyone refinanced at the lower rates anyways, they may as well raise the rates a bit to meet

that demand level. On the FOMC, the Federal Reserve, the minutes in the July meeting were released. The Fed seems to be inching closer to changing their policy to an average inflation target instead of an inflation target of 2%. By having an average inflation target, when you run for several years below 2%, it'll let you run several years above 2%, what they would call running hot to meet that blended number. And there was a lot of reporting on the idea that some Fed governors seem to be expressing skepticism about the use of yield curve control, where the Fed would use the buying of bonds to implement kind of the forced caps of yields at certain points in the yield curve. And I am of the opinion that that will end up happening at some point, but the Fed is of the opinion right now it's not necessary.

And so they most certainly seem to indicate it not being necessary now more than based on the fact that market forces were doing it for them. Not that those yields were not in need of being capped, but that the market was capping yields without the Fed intervening, so why intervene? Some information in COVID and markets about commercial real estate, particularly rent collection averages on a report I read. So check that out. And most importantly, get ready for Dividend Cafe tomorrow, Friday. Thanks for listening to today's COVID and Markets. The beat goes on. The country is getting healthier.

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