While epidemiology is fascinating, I never signed up for this pastime. Yet, in order to be an effective investment strategist over the past 20 months epidemiology has become a prerequisite, and so I trudge forward.
Discussing COVID-19 in polite company has become difficult in my life, with the gamut of opinions running from “it’s a hoax” to “we should all be in bunkers.” Here’s my stated supposition, COVID-19 is real, it’s a nasty virus presenting minor but real mortality risk, and it won’t be controlled.
A couple weeks ago I cited the delta variant as a possible influencing factor on movements in interest rates, but at the time I wrote, information on the variant was still emerging so we had to wait and see. Well, enough patterns can be observed with the recent flare up and I think we can start making some economic assumptions.
The information I will cite here is sourced from the New York Times “Coronavirus in the U.S. Dashboard,” which presents data from the Federal government in a graphical and easy to use way, and the Natixis “Coronavirus Dashboard” which is an internal resource I’ve been using for months to stay informed of the pandemic. Dates cited will change by availability of data.
On Aug. 18, 2020, the new daily reported cases of COVID-19 in the U.S. were 48,779. On Aug. 17, 2021, with 45 out of 50 states having more than 50% of their populations either fully vaccinated or a having had a prior COVID infection, new daily reported COVID-19 cases are 144,297.
On Aug. 17, 2020, the seven-day average of people in the U.S. losing their lives with COVID was 1,061, on Aug. 17, 2021, this sad number is 696.
I could slice and dice data all day long, but what is my point? COVID is not going away, and it is not something that can be collectively avoided. The good news in these numbers is a far lower percentage of infections are resulting in death; the bad news about these numbers is COVID is nearly three times more widespread in August 2021 than it was in August 2020, and we are no longer waiting for a vaccine, it’s already here.
If we were at the Thanksgiving dinner table this is when the arguing would start. Anti-vaxxers, vaccine shaming, masks, lockdowns, cries for mandates. It’s all very emotional, people are scared. I get it. I do however, think we are beginning to arrive at our final destination.
At the start of the crisis, the government had to intervene. There simply wasn’t enough quality information, and sweeping approaches were the reasonable response. Did it work? Maybe, the worst scenarios were avoided. Will sweeping mandates work going forward? Well, let me just say, the implementation of the “indoor mask mandate” at the university I just dropped my son off to came off about as effectively as the “no graffiti” sign at the bus stop in south Chicago. Yeah, you know the one.
Collective mandates, whether it be vaccination or masks, will not be the solution going forward. Quality information on COVID is now available, we all have access to it and we all need to decide how to manage this risk for ourselves, and from an economic perspective this is what concerns me.
My dad decides not to go to a concert he has been excited about for a year, not because it was canceled, but because he is reasonably concerned about COVID risks at the event. A client tells me they have postponed their trip to Florida, not because a government says they have to, but because the hospital beds are full there and they would hate to have a medical emergency on the trip. Another client tells us he didn’t renew his office lease in July and all of his 70 employees will now work at home indefinitely.
These are all individual micro-economic decisions based on observation and experience with the pandemic. People are evaluating and managing risk on an individual basis, which in my opinion marks the beginning of the final stages of this pandemic.
When governments across the nation locked us down, the federal government and the Fed also showered the economy with safety net benefits and liquefied the markets with monetary expansion. While traumatic, these actions were straightforward to observe. Markets responded accordingly.
With cases once again on the rise, and the mandates either behind us or poorly executed, the impact of this pandemic going forward will be derived from the actions and decisions of individuals, which in my opinion are much harder to fully evaluate. As markets grapple with this concept going into the fall and winter uncertainty will rise; don’t be surprised if volatility follows.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing includes risks, including fluctuating prices and loss of principal. Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc at marc.ruiz@oakpartners.com. Securities offered through LPL Financial, member FINRA/SIPC.
