7/12/2020: Weekly Wrap-up and What to Expect

COVID-related deaths have started increasing, but the number of new deaths per new COVID cases have decreased significantly from 8% in mid-April to 1% in mid-July, demonstrating a significantly decreased chance of death from COVID.

Market Movers

The S&P 500 ended up ~1% last week with significant volatility throughout the week. The ups and downs of the market and recent COVID-related news still have investors uncertain about the U.S. economy. Rising COVID cases are balanced by the potential for a vaccine as early as this December. Reclosing states are balanced by a potential second round of stimulus checks. Here are the details:

  1. 📉 Nearly 50% of states have paused or reversed select re-opening plans, but primarily in the restaurant industry. Since the rise in COVID cases in mid-June, nearly 50% of states have paused or reversed re-opening plans. Re-opening reversals and pausings is mostly around indoor-seating for bars and restaurants. Retail stores and other services remain open for the most part in the vast majority of states. While this is concerning for the restaurant industry, other industries should still benefit in most states from the recent re-openings.

  2. 📉 COVID-related deaths begin to trend upwards as COVID cases continue to rise. COVID-related deaths began to increase last week. This slight uptick in deaths is expected as it is the lagging result of rising COVID cases and hospitalizations. This is the most concerning metric for the economy as it is what will likely lead to additional shutdowns. We will keep a close eye on deaths, but there are some important nuances to make, such as the death-to-case ratio.

  3. 📈 However, the ratio of COVID-deaths per case has decreased dramatically since May, demonstrating greater survival rate. An important note to make is the percent of deaths per new case now versus May. As of 7/10/2020, COVID deaths per case was ~1% compared to ~8% in mid-April. This 8-fold decrease in deaths per case is likely due to a less vulnerable population getting infected and new treatments to fight COVID. While the increasing deaths is disappointing, the rate of deaths per new case decreasing is promising for the future.

  4. 📈 Furthermore, vaccines and treatments are making progress with BioNTech and Gilead announcing positive news last week. This week, Gilead and BioNTech both reported positive news in the fight against COVID. BioNTech announced that, upon approval, it could produce several hundred million doses of COVID vaccine before the end of 2020. Furthermore, Gilead announced that it discovered, through its recent analysis of clinical trial data, that its COVID treatment drug, remdesivir, was able to reduce the rate of death in severe patients by 62%. However, this was a retroactive comparison to historical controls, so people are cautious to draw firm conclusions of remdesivir’s capabilities. Both items of news are promising towards the safety of a quick and full re-opening of the U.S. economy. 

  5. 📈 In addition, there is going to be a second round of stimulus checks, while they may be smaller than $1,200. White House economic advisor Larry Kudlow stated that a second stimulus check may arrive as early as August. However, he noted that these checks will likely be smaller than $1,200 and targeted toward individuals making <$40,000 or are unemployed. This move is aimed at providing a smaller round of stimulus as economies have re-opened significantly.  

WX Capital maintains our opinion that the stock market will be volatile in the near future. As mentioned previously, the push and pull of COVID news will greatly influence market performance. However, the promising news of decreased deaths per new case and a potential vaccine by end of 2020 will likely drive markets upwards as we move deeper into the second half of the year. Please don't hesitate to reach out with questions!

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