06.22.2020 – Market Update
The S&P 500 closed the week at about 3095. Tech and health care were the leaders, while losses in consumer discretionary, energy and financials held the broader index back.
A spike in global coronavirus cases weighed on global equity markets earlier last week, however the S&P500 still rose 1.7% by the close Friday.
Global equities also had a up week led by the German/DAX (+3.2%) and UK/FTSE (+3.1%), driven by recovery hopes and central bank liquidity.
Federal Reserve Chair Powell’s testimony to Congress last week reiterated the view that policy will remain highly accommodative for the foreseeable future, with interest rate hikes not even in sight. Last week’s move by the Fed to purchase a portfolio of individual corporate bonds helped turn up the risk appetite.
The network news, almost always late to the true trend, is ignoring the virus data behind the scenes. The states seeing sustained rises in cases are not seeing a proportionate rise in healthcare utilization/hospitalization rate. Data suggests only 40% of new hospitalizations are virus related. The remaining 60% of the hospitalization increases are NORMAL increases due to 1) a pickup in economic activity due to increased mobility such as car wrecks and other accidents and 2) a reacceleration in elective hospital procedures. The facts are that hospitalizations and daily deaths are still 90% off their highs, despite the recent surge in detected cases. The factual divergence remains that cases are up, but hospitalizations and deaths are down. This is true in most of the 5 states which are accounting for the bulk of the increase in cases. There is not a sustained surge in “net hospitalizations”, even in the states reporting a surge in cases.
For what it’s worth, the comments that doctors he around the world, most recently Italy, have recently made about the disease seem quite telling. For instance, the Chief of Infectious Diseases at San Martino Hospital (Genoa, Italy) spoke about how the elder COVID-19 infected patients they see today are in considerably better health, compared to few months ago. A few months ago, elderly patients might have passed away after 2-3 days, and now they are breathing on their own.
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