How Serious Are These Covid-19 Spikes For The Market?



If the headlines are right, the market is down again on Thursday because of a new spike in coronavirus cases throughout the American south. Apple AAPL said yesterday it was closing even more stores. Macy’sMsays it was laying off over 3,500 people who thought they were getting their jobs back this year. And Chuck E. Cheese is filing for bankruptcy because, unlike places like Dominoes and mom and pop pizza joints, the pizza is secondary to the experience and you cannot take out an experience. Rest in Peace, Chuck E. Cheese.


Covid-19 has been a blessing for the market. The government is experimenting with what looks like Modern Monetary Theory, printing money to support the securities market from a blood bath. And a never-before-seen bailout of Main Street with record high unemployment benefits, payroll protection plans for the self-employed — including Uber UBER drivers — and small business owners. Not to mention the individual checks cut to every adult in the country, a good month’s worth of grocery bills for a family of four. (Unless they’re shopping at Whole Foods and everything has to be organic.) The market loved all of this stimulus and the lows, reached in March, didn’t last long at all.


The U.S. stock market is off maybe 12% from its pre-pandemic highs.

Covid-19 has also been a disaster for the market, with long term implications everyone is still getting their heads around.


“U.S.-centric fears of a second wave continue to damage market confidence,” says Joshua Mahony, senior market analyst at IG.“Despite Trump's insistence that there will be no second lockdown, the current trajectory in certain states does little to instil confidence that this reopening can carry on unhindered.”


The latest headlines about cases of coronavirus are missing many tell-tale details, namely hospitalizations and death. If few are dying, and fewer are being hospitalized, what are we so worried about this time?


“It was to be expected that there would be some spike in coronavirus cases as economies begin to re-open. But what wasn’t priced in was that the situation would start to get out of control just as it did in Texas. New cases have soared and hospitals are close to their full capacity,” says Naeem Aslam, chief market strategist for Ava Trade.

Much of the reporting focuses on the surge in cases and increased hospitalizations. Only four states are taking center stage here: Arizona, Florida, South Carolina, and Texas.

Some of the increase in cases can be explained by a ramp-up in testing, but this alone does not explain the rise in cases in some of these states.


“The good news is that the notable rise in cases has not translated into any uptick in deaths,” notes RBC Capital economists led by Tom Porcelli in a five page note to clients. “None of these four states has made a new high in average daily deaths. Florida in particular, remains decidedly in a downtrend.”


The conversation on Wall Street about case counts rising is all centered on worries about governments going back to lockdowns. The Texas government said they are not going back into lockdown. Forget it. That strategy has failed. You can run but you cannot hide from the coronavirus.


What’s going to matter most is hospital saturation from herein, and markets will eventually get back on this indicator. If hospitals are overwhelmed, people will refrain from going out regardless of lockdown orders. They will take matters into their own hands.


The Cognovi Labs Coronavirus Panic Indicator sits at 52 on a 100-scale, suggesting people are still in panic-mode, but less than they were during peak coronavirus.

As far as concern over death rates by Covid-19, the Panic Score there sits at just 12, meaning Americans are not talking about this as much as Bloomberg and Financial Times reporters are writing about it.


In Texas, the overall Pandemic Panic Score is 58, pretty much tracking a three month trend line.




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