The Dividend Cafe - Daily Covid and Markets - Thursday July 9

Episode Date: July 9, 2020

I’ll save you the play by play of what happened with futures last night and this morning, but it was pretty boring. And the markets moved higher a bit pre-market when the jobs numbers came out (see below). But what moved markets lower during trading today seems to be (and I say “seems” because it really doesn’t seem to be much of a market moving event to me, but it was perfectly time to the release of the news) the announcement that the Supreme Court is allowing the New York DA to get Trump’s tax returns. Anyways, the market went down over 500 points, but closed down 350, and actually the S&P was down less than half what the Dow was, and the Nasdaq was modestly up today. So it was not a normal day. 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 missive brought to you by the Dividend Cafe podcast of the Bonson Group. This is David Bonson and I'm going to get right into it here. Kind of a weird day in the markets. Let me get that stuff out of the way quick. And then we're going to spend most of our time on the health data. And I'm recording at about 515 Eastern. And so I'm still a good 45

minutes away from getting some of the final data today. But that will all be updated in the covidandmarkets.com but just based on our schedule today and so forth we need to record a little earlier so there's still a lot of information I want to share but listen as far as the market it was kind of flat on this morning pre-market it went up a bit when the jobs data came out and then then we were, oh, I don't know, at least an hour or so into trading and markets were flat, up a little, just kind of a boring day, boring night, boring morning. And then I have to say it was related to it. It just doesn't make any sense to me. I really don't have any idea why it would be much of a market event,

but the market did drop really within minutes after the announcement came that the Supreme Court had ruled that President Trump did need to turn over his tax returns to the New York District Attorney, more specifically that the banks, they were subpoenaing for them and various financial institutions would have to comply. And then the Supreme Court ruled for President Trump as far as Congress trying to get their hands on it. And so it was a mixed bag around that. And who knows what's going to end up happening. And also, who knows what in the world it really has to do with market prices. who knows what in the world it really has to do with market prices.

But the other part that I just have to tell you by way of caveat is the Dow that went down over 500 points, it ended up closing down 350. So it made a lot of that back, but the S&P was only down about a third as much as what the Dow was. And the NASDAQ was actually up on the day. And so it's just kind of a weird day. It was a mixed bag of things. I wouldn't read into it because there's not really a direct correlation. And you had very different behaviors amongst the three major market indices.

So I don't think it's a good day to try to guess what was causing it. By way of jobs numbers, the weekly initial jobless claims came in at 1.31 million. It was 1.38 million expected, so a little lower than expected there, but still an elevated number. The continuous claims did drop to 18 million. That was down almost a full million from last week, which was more than expected. So that's modestly good incremental news. In terms of the health data, though, I want you to bear with me on a couple of things. There is a chart at cobaltmarkets.com and I had brought up Monday a number that I think remains one of the most intriguing parts of this whole escapade, which is deaths as a percentage of hospitalizations.

Okay, the deaths divided by total positive cases has collapsed, praise God. Everyone knows that. And the reasons there are really pretty indisputable. I don't think it's very controversial. We have a massive amount of new cases that are asymptomatic or barely symptomatic. They're with younger and healthier people. This is all kind of good stuff, but it's largely why you're not seeing the mortalities go up in proportion with the new cases. But once a case gets to hospitalization, one would think it cannot be anything other than serious, right? I mean, people don't go to the hospital for COVID unless it's serious. Yet 7% of hospitalizations were resulting in death three months ago, and only 1% are now,

okay? And I'm quite sure that a lot of that can be attributed to that even the hospitalizations are less critical than they were back in March or early April. And I'm also sure that a lot of it may have to do with the better treatment, that they're saving more lives with various therapeutics, remdesivir, hydroxy, different doctor evolutions and their understanding how to treat it. That's all good. But it would strike me as really clear that that reduction in deaths would have something to do with people in the hospitalization data not being hospitalized from COVID, but being hospitalized from COVID, but being hospitalized with COVID. And that distinction

is one of the reasons that the deaths as a percentage of hospitalizations are so massively spread apart. And there's a chart I think you'll find interesting. And some of my late night research last night, after looking at some of the data dump that took place, I noticed like a state of New Jersey is not in much radar right now. I mean, the governor's saying things and doing things, but the state is in a really, really good position health-wise now. And yet they basically decided to add probable deaths to their backlog and did a dump of that data yesterday. And so they increased by 59 deaths. The national death count, that's 6.6% of the total deaths reported in the whole country yesterday.

I'm not totally clear what a probable death is, but I'll leave that alone. California reported 8,500 new cases yesterday, which is a pretty steep jump higher. But then again, a couple thousand cases are being reported as backlog from L.A. County laboratories with timelines ranging from days to weeks to months of old cases. So it's very frustrating that some of this data is being inflated this way. And yet I also, again, am quite confident that some of the numbers, not as much in California. There really isn't much in California that's causing grave concern, but with Florida, Arizona, Texas, there's no question that you see the case growth and you see some of the hospitals getting more crowded. And even though the mortalities are still in a

very, very low range, I don't want to take lightly where those numbers are, but I also don't want to give dishonest, misleading numbers. I do want to continue to address the issue of herd immunity, which I think is the greatest unknown in all of this, and perhaps is the most relevant to future public policy. There's, you know, how early COVID was actually on our shores will have a lot to do with how much of the herd immunity progress has really been made. Those who've been exposed to previous coronaviruses would have a lot to do with what T cell immunity is built up.

But I really do think that we have to get a better understanding of the Swedish epidemiologist, Europeans, very, very confident that herd immunity is a metric that is a dynamic that comes in at a 20% metric, not as 50 or 60 percentage metric. And when you look to Sweden's numbers, they're just plunging cases right now and plunging death count, which has been plunging, you know, for the better part of almost three months. I think it's entirely possible that that's the kind of, you know, dynamic that we're headed towards. I don't think it's a closed case for me and most certainly there's nothing political uh my view is just i i want to objectively extract data for the purpose of learning from trial and then and then i don't it's not i don't care to

express outrage over what counter policies may have been it's just that if there's empirical evidence that might monitor, excuse me, might influence future policy, I think it's going to be really relevant. And so we're going to keep watching that and see if over the days and weeks ahead you get more confirmation of what the dynamic is that creates the proper amount of herd immunity, where you could essentially get a lot of the dynamic that a vaccine is going to need to create eventually, even pre-vaccine. That'd be encouraging to everybody. So again, I apologize that I don't yet have the data for today to share as far as testing and new cases. I do have a chart of COVID markets showing how the second wave flared up in China and flared up in Korea, and then how quickly those things fell off. It was about a two-week period to peak, and I'm optimistic that we're facing the same. We have a little bit of room to go here until Arizona,

Florida, and Texas peak out. But perhaps some more important charts I've ever done at COVID markets, as you can see, the seven-day average death count for those three states has climbed from 77 people to 130 people. And that's with all three states put together. Now, as an absolute number in the size of these states and the size of our country, it's really, it isn't a huge number. It's not a systemic factor. It's certainly something that really concerns me in terms of the big picture. But I would say that you have to look at the chart next to it, which shows all other states where the daily death count

as a 70 average has dropped by 300. So you have three states that have gone up by about 50 and 47 states that have gone down by about 300. And that is why I think there's such a regionalization to what's going on right now. And we pray for the people in Florida, Arizona, and Texas. I have to leave it there. You may have heard my cell phone ring.

I have a call I got to jump on. I've packed myself in kind of tight today. I normally like to be able to go through with you the public policy and some of the market technicals. If you're listening only for the health data, then you still need to go to covidamarkets.com because there's a lot more there, a lot of charts, and plus the finality of Thursday data you'll get. If you're listening for the whole kit and caboodle and you actually like the public policy, Federal Reserve and other departments, those will be online. So you really have to check that out today. Dividend Cafe comes tomorrow. Thank you, as always, for listening to the COVID and Markets Podcast of the Dividend Cafe. Thank you. Any opinions, news, research, analyses, prices, or other information contained in this research

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