The Dividend Cafe - Daily Covid and Markets - Thursday July 30

Episode Date: July 30, 2020

COVID Health Information • The seven-day average of new tests is now 820,000, a new high (by far). Nationwide, the increase in cases over the summer is practically in line with testing increases. It is the select states where positive cases outpaced increases in testing. • Add Johnson & Johnson’s Ad26.Cov2-S to the list of vaccine candidates showing very positive results. Their trials thus far were limited to monkeys, though a clinical trial has now begun in Europe and the United States. The full study has been peer-reviewed, and is available upon request. The source of excitement here is that the strong antibody response is coming from a single dose … They are targeting phase 3 trials for September • A source of mine had been sending me daily updates throughout the last few months on one of New Jersey’s premier hospitals and their COVID exposures, particularly when they were seeing hundreds of patients per day, suffered extraordinary losses, and were having to re-purpose facilities to meet demand. At some point it waned, then they shut down the COVID wing, then the COVID patient load of standard inpatients and ICU steadily declined. Well, today, I got an update. For the first time, this hospital does not have a single COVID patient. Praise the Lord. • Not a lot of change in the general messages of the chart quadrant today. Cases are declining; hospitalizations are declining in the troubled places and flattening elsewhere; a few smaller states are seeing some mild growth in cases off of very low levels. The questions in front of us deal with society’s ability to “live” with this virus, and to continue mitigation against severity and mortality. 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. I'm going to just kind of get right into it, give you a little market rundown and then walk through our various categories today. It was an interesting day in the market because we closed down 225 in the Dow, but we were down 550 points a little while after the opening. The futures had pretty much been down about 200 points all morning.

futures had pretty much been down about 200 points all morning. Again, I was up well before four o'clock in the morning Eastern time. And all the way up until close to 9.30 Eastern time when the market was set to open, the futures have been down 200 points. And yet, then President Trump tweeted something to the effect of wondering whether or not we should delay the election. And the futures dropped another 100 points pretty quickly. And then after the opening dropped another couple hundred. And so, you know, I talk so much about the dangers of trying to identify a specific catalyst to market behavior. And sometimes it's a little easier than others. In this case, it's pretty easy.

There just simply wasn't anything else going on. And it was such a kind of bizarre tweet that obviously that seemed to have been somewhat disruptive. But then the market sort of settled throughout the day. And in fact, the NASDAQ was up on the day, the S&P was down much less than the Dow. Some of the big tech companies, I think, were quite resilient after some of the grilling that they took from both sides of the aisle last night. And in fact, as I'm sitting here recording now, after hours on Thursday, after market hours, you're looking at a pretty big rally in a lot of the different thing and big tech names from their Q2 earnings results that

mostly came out after hours today. So we'll see what tomorrow holds in the market, not just in technology, but across the whole sector spectrum. But let's go ahead and dig into the COVID side of things. And I'll make a couple other comments on where we are in the public policy side. on where we are on the public policy side. The seven-day average of new tests per day is now up to 820,000. That's a new high in the U.S. by a pretty wide margin. Nationwide, this is an interesting statistic, nationwide the increase in cases over the summer is practically in line with testing increases.

But in those select states that have obviously been the bulk of the attention, the positive cases have outpaced the increases in testing and in the Florida, Texas, Arizona range quite substantially. But the ongoing testing continuing to move higher and the positivity rate continuing to move lower, and I suspect that's encouraging on a number of different fronts. Add Johnson's vaccine candidate to the list of kind of top-tier candidates showing positive results. The incredibly cleverly named AD26.COV2-S. So far, their trials have only been limited to monkeys, and yet a clinical trial has now begun in Europe and the United States.

I do have a copy of the peer-reviewed full study that is available upon request, COVID at thebonsonstonegroup.com. But there's excitement because their strong antibody response that they're going for is coming from a single dose. And there had been a lot of assumption that it would require a double dose to get to that level. So we'll continue to keep you posted on the vaccine side of things across the different spectrum of leading candidates. This Johnson & Johnson candidate is targeting phase three trials for September. Kind of interesting, and it is anecdotal, but I like it from a, pardon the pun, no double meaning or anything, but I think it's symptomatic of where a lot of

the country is. It should be celebratory. It bothers me that it's not more publicly displayed. So I'll share it here, but a pretty premier New Jersey hospital, I happen to have had a source there who had been sending me their data for that particular hospital pretty much every day throughout quarantine, throughout the peak of the COVID moment back in March, April. And, you know, they were seeing hundreds of new patients per day suffering extraordinary losses of life, you know, having to repurpose part of their hospital facilities to meet demand. And at some point that began to wane. There was a, they had created a COVID wing that at one point shut down. And I remember that being a big moment. And then, you know, their COVID patient load,

standard inpatient ICU was declining, all going in the right direction. And then today I got an update that for the first time, this hospital does not have a single COVID patient. So I just thought that was worth sharing. The Ohio Pharmacy Board has reversed their decision. They were one of the more higher profile entities in conjunction with the Ohio Medical Board of banning hydroxychloroquine in conjunction with the Ohio Medical Board of banning hydroxychloroquine and even on emergency use basis or doctor discretionary basis. And they have reversed that decision upon further medical review. So something interesting going on there in Ohio. In my kind of quadrant of charts at covidandmarkets.com, there's not a lot of changes in the general message. Cases are declining. The growth of cases are declining. Hospitalizations are declining in the troubled places and flattening or declining everywhere else.

The few states where there is some mild growth in cases, it's off of very low levels. It's off of very low levels. The questions in front of us, I believe, deal with our society's ability to live with this virus and simultaneously continue mitigation against severity and, of course, mortality. So a few charts to kind of check out there. Florida's case growth is down 25% from its rolling average of a week or so ago, but it has not been coming down further over the last few days, and that's certainly testing people's patience. We will hope that by next week you start seeing a more substantive decline.

Again, the good and bad news. You did get a good little decline in case growth in Florida, but then after that decline, it has flattened out there in the 9,000s as opposed to a continual move lower. And so we want to see that improve. On the hospitalization level, Miami-Dade County is down 10% from a week ago. Tampa Bay is down 20%. And elective surgeries are largely resuming on Monday and most of the Gulf Coast. So some positive lines there out of Florida, even as we still see a very elevated case level and pray for that to decline. Hospitalization inpatient data in Arizona, if it's because if it looks like I'm showing the chart every day, which I'm not, I'm pretty consciously doing it like every other day, but I just love the chart. I love seeing the collapsing of inpatient hospitalizations and ICU hospitalizations

in Arizona. I think it should continue. It should be a continued conversation around what to expect in the other states that are trailing Arizona's outbreak. By the way, the death count in Florida that has been going higher on a reported basis, meaning a higher number of deaths being reported in a single day, but then the date of all those deaths is spread out over a bunch of different days. all those deaths has spread out over a bunch of different days. And the worry is that, you know, as you keep going, you'll see that there were in fact higher deaths on past dates that we've already experienced. And I just want to note that with Arizona, well past its peak now and declining substantially in ICUs and hospitalizations and ventilators and obviously cases,

substantially in ICUs and hospitalizations and ventilators and obviously cases. And they've had days where they're reporting over 200 deaths. They reported 172 today, yet going all the way back to beginning of July and their peak, they didn't ever have a day with over 80 deaths in that day. So again, just to give you that proportion, I share the data because I think the proportion is what's really important to understanding the context, understanding economic sensitivity, understanding policy treatment, understanding where maybe some of the panic levels were not totally justified, and yet at the same time, 80 deaths or one death, recognizing and appreciating the tragedy of that. California had a little faux pas in San Diego County,

admitting that they had substantially overstated hospitalizations a few days ago. Hospital executives actually spoke out and said, we don't know what's going on. Our data is improving. Hospitalizations are declining. The press ended up indicating that there was a math error. So the good people of San Diego County are, I'm sure, happy to know their hospital capacity is level right now to where it was actually in early June, not in fact seeing a really fearful, concerning decline of

capacity for hospitals in San Diego County, California. I posted a slew of numbers. Believe me, I'm not trying to ignore LA County. I would love to include LA County in a lot more of my daily summary of California, but their data is just so stale right now. They still have not updated hospitalization data since July 23rd. It's now the 30th. They said they needed a little time to get acclimated to new federal reporting requirements. It appears that the vast majority of every county in the United States of America has been able to do that. Apparently, the second or third largest county in the country has not been able to. But in Orange County, there's five different metrics that are relevant to the California Department of Public Health and their kind of requirement to be considered on or off Governor Newsom's hot list. Governor Newsom's hot list, the change in three-day average hospitalization is negative 8.6%. They have, over a rolling three-day period, averaged a decline of COVID-hospitalized

patients of 8.6%. Their positivity rate has dropped from 17% to 11.7. We still have nearly 40% of ICU beds available. We still have nearly 60% of ventilators available in Orange County. And case rate per 100,000 has dropped from about 260 to about 149 just in a week. So really substantial improvement in Orange County. And don't have anything to report here for Texas. They continue to be kind of a later addition each day of data. And as I'm recording before a dinner appointment tonight at 545 Eastern Time, Texas is not yet reported,

so I don't have anything to offer you there. So I already kind of gave you the rundown on market action today. We'll be looking for where things go here tomorrow. I'm quite confident that futures are going to open up in a half hour to the upside based on some of the aftermarket reporting we've seen today.

I do have some charts and a little bit of commentary at covidandmarkets.com, just really encouraging a continued understanding and revisiting the emerging markets growth story, not only based on the technical backdrop and the weaker U.S. dollar and the valuation story, but the surge in copper prices, the tightening of credit spreads in emerging markets, and then also the fact that money flows have not bought into the story. From a contrarian standpoint, it isn't like there's a whole bunch of pent-up positive sentiment around this. That sentiment is still yet to come, and that's exactly when we most like an investment. Public policy side, there are on-again, off-again rumors that the Senate and the House are talking

about a quote-unquote skinny deal to get through the next couple of weeks, do a smaller, thin-down version of stimulus to cover an unemployment package and maybe a few other imminent things, and then work over the next few weeks on a bigger picture package things, and then work, you know, over the next few weeks on a bigger picture package. I've talked to a couple sources, both on the Hill and in the White House, to tell me no such thing is imminent. And then Chief of Staff Mark Meadows' exact words, which were publicly pronounced, this was not off the record to me, were, quote, we are nowhere close to a deal, end quote. So I promise not to keep telling you each day that there's nothing to tell you, but there we are. Housing market pending home sales were up

16.5% month over month in June. We're now up year over year. Housing as a leading indicator, giving a very positive message to the economy. Now, the headwinds include the concern that the unemployment picture and various economic weaknesses could spill into more mid-tier, let alone higher-tier income levels. Right now, where the bulk of those economic pressures have is in the less housing-sensitive tiers. I also would add concern about a potential unwinding of the forbearance mess from the CARES Act, although there has been some positive data to that effect lately. So healthy housing market at this time. Some people reached out asking me what I thought the forward guidance the Fed may offer in September would be.

I certainly think that they're going to begin talking about the future of interest rates as more inflation sensitive, where essentially, in addition to just telling you we're not going to raise rates for a couple of years, they're going to more and more talk about how, yeah, and even then, you know, it's all going to be based on inflation indicators. And that's really a way to talk down rates even further because inflation levels are so low and going lower and expected rates of inflation are lower still for longer. I suspect forward guidance can include some indication of a willingness to really ramp up asset purchases as well, treasury bonds, mortgage-backed securities, things of that nature. I don't know at this time if September will include a more formal introduction of yield curve control or not. I stand by my earlier year forecast that that will be a part of the Federal Reserve policy portfolio at some point in time.

So there you go, covered around the horn, the Fed, housing market, public policy, the market, the health state of affairs. And we will look to see what Friday brings. Please read the Dividend Cafe weekly commentary tomorrow, Friday, and reach out to us with any questions you may have. We do hope you will share covidandmarkets.com and this podcast with anyone you wish. Thank you again for listening and please have yourself a wonderful Thursday evening. Thank you. The Bonson Group and Hightower shall not in any way be liable for claims and make no expressed or implied representations or warranties as to the accuracy or completeness of the data 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. 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 tax or legal

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