The Vantagepoint Market Perspective: COVID-19 — Are We Ready for Some Football?

07/30/2020

 

As we round out July, football season is just around the corner. Training camps are starting to gear up, both for professional and college players. But this year is unlike any other.

The last National Football League game played was the 2020 Super Bowl, which occurred in early February prior to the domestic onset of the pandemic. And for months, planning for this fall’s NFL and college seasons proceeded as if everything would be back to normal by the time the first kickoff took place.

Assumptions Versus Normality

But in recent weeks, the large increase in the number of people testing positive for COVID-19 in many parts of the country has made it clear that an assumption of normality does not equate with actual normality. As a result, leagues and conferences have begun making adjustments, such as the NFL altering its preseason (there won’t be one), some college teams deciding to limit their games to only opponents within their own conferences, and other conferences making larger schedule changes (like cancelling fall sports altogether). Meanwhile, flareups of the virus have curtailed voluntary workouts for players on teams at Ohio State, North Carolina, Kansas State, Houston, and elsewhere.

There are also other outstanding obstacles to salvaging some semblance of a normal playing season in the current environment. For example, in some states where even small gatherings are still forbidden, it seems highly unlikely that fans will be allowed to gather in stadiums to watch the games. Other states, where fans might be allowed to attend the games, are facing recent COVID-19 outbreaks that might be further exacerbated by large gatherings. Then there’s the question of how to handle a team from an area with a high rate of infection that’s playing in an area with a low current rate of COVID-19 — or vice versa.  

Other Sporting Examples

The attempted restart of Major League Baseball may offer a cautionary tale for other sports. Unlike football, the MLB has put a number of protective measures in place, such as not allowing any fans in the stadium to watch games being played and regularly testing players, coaches, and staff.

Yet during the first week of the league’s attempted resumption of its delayed season, the Miami Marlins were forced to postpone their home opener after more than a dozen players and staff members tested positive for the virus after playing in Philadelphia. As in any sports league, an impact on one team has a ripple effect on other teams. And the Marlins issues prompted the postponement of other baseball games, which may prove challenging to reschedule during an already shortened season.  

Other teams have experienced similar hurdles. For example, our firm is based in Washington, D.C. and our hometown team’s most promising player Juan Soto was not included on the team’s roster for the Washington Nationals’ opening game against the New York Yankees after testing positive for COVID-19 the morning of the game. In addition to players testing positive, many baseball and football players are opting not to participate in their seasons altogether, citing concerns for personal and family safety in the midst of the pandemic.

Football teams — both professional and collegiate — have more closely followed baseball’s pandemic model than that of the National Basketball Association, which has taken a wide variety of steps in an effort to place its players, coaches, and staff in a protective bubble before getting back to the game.

While basketball’s pending launch also faces challenges, so far it appears that that league’s bubble approach may be better positioned to avoid outbreaks along the lines of the Miami Marlins situation. Football, which features larger rosters and is a higher-contact sport than baseball, will be monitoring the MLB very closely for any lessons and best practices, while also evaluating whether it should contemplate transitioning to a bubble approach similar to that of the NBA.

Back to School and Work

Which brings us to the bigger question looming on the COVID-19-economic front: the successful return of children to schools and their parents to their workplaces. If the resumption of those two formerly normal activities follows a path similar to what’s happening in the sports world, it doesn’t bode well for the economy or the market.

If some places — whether occupational or educational — decide to bring people back without the rigorous testing in place that exists in the sports world, it’s likely to lead to new outbreaks that will in turn force businesses and schools back to operating on a remote basis. Without confidence that in-person schooling is reliably and consistently available, parents will have difficulty planning, scheduling, and meeting their own work obligations. Similarly, if uncertainty around the safety of workplaces persists, companies will have to make adjustments that could be costly, impede productivity, and expose them to various liabilities.

All of these challenges will further stunt our economic recovery, which everyone is eager to see resume its trajectory back to full employment and the pace of growth it experienced before the COVID-19-inspired shutdowns.

The Federal Reserve Open Market Committee acknowledged the importance of getting back to normal in its statement Wednesday at the end of its two-day meeting, saying: “The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”

Thursday’s GDP report — the broadest measure of goods and services produced — showed how big of an impact the COVID-19 closures have had on the nation’s economy so far. Second-quarter GDP plummeted -32.9%, the largest drop on record.

Stimulus Deal?

And that brings us to the other outstanding question of the moment: the shape and the size of the next stimulus package, which currently seems to be mired in vastly different ideological approaches in Congress. So far, the markets seem to continue to believe that an effective COVID-19 vaccine is on the cusp of development and subsequent release and that the government will soon unveil a robust stimulus package that will cushion the virus’ economic fallout.

If either one of those scenarios does not materialize in the timeframe Wall Street is expecting, the market’s optimism — along with the robust gains and rally that we have experienced since April — could be confronted with a return of market volatility.

We remain hopeful that Congress will resolve its different approaches to produce a new round of legislation that supports individuals, businesses, and state and local governments that have been impacted by the pandemic.

If adequate legislation is not forthcoming, we will be entering the most intense period of the presidential election cycle with a focus on recriminations rather than solutions and risking real economic damage and heightened market volatility. In the time of year when we all might turn to football for a welcome distraction from these issues, we cannot even be certain that kickoffs will occur. We all want school, work and sports to return to normal. The question remains: are we ready?

Disclosures:

This information is intended for institutional use only and is not intended for individual investors or the general public. This article includes links to external websites. While we believe this information to be reliable, we cannot guarantee its complete accuracy.

Please note that this content was created as of the date indicated and reflects the authors’ opinions. These opinions are subject to change, without notice, due to market conditions or other factors.

This is not intended as a solicitation nor does it constitute investment, tax, or legal advice. Reference to any fund or asset class is not a recommendation to buy, sell, or hold that fund or asset class. Neither ICMA-RC nor its subsidiaries are responsible for any investment action taken as a result of the information provided herein or the interpretation of such information. Investors should carefully consider their own investment goals, risk tolerance, and liquidity needs before making an investment decision. Investing involves risk, including possible loss of the amount invested. Past performance is no guarantee of future results.

When Funds are marketed to institutional clients by our Defined Contribution Investment Only (DCIO) team, the Funds are offered by ICMA-RC Services, LLC (RC Services), an SEC registered broker-dealer and FINRA member firm. RC Services is a wholly owned subsidiary of ICMA-RC and is an affiliate of VantageTrust Company, LLC and Vantagepoint Investment Advisers, LLC. Learn more at www.vantagepointfunds.org.

Disclosures:

This website is for institutional use only and is not intended for individual investors or the general public.

This information is intended for institutional use only and is not intended for individual investors or the general public.

Please note that this content was created as of the date indicated and reflects the authors’ opinions. These opinions are subject to change, without notice, due to market conditions or other factors.
This is not intended as a solicitation nor does it constitute investment, tax, or legal advice. Reference to any fund or asset class is not a recommendation to buy, sell, or hold that fund or asset class. Neither ICMA-RC nor its subsidiaries are responsible for any investment action taken as a result of the information provided herein or the interpretation of such information. Investors should carefully consider their own investment goals, risk tolerance, and liquidity needs before making an investment decision.

When Funds are marketed to institutional clients by our Defined Contribution Investment Only (DCIO) team, the Funds are offered by ICMA-RC Services, LLC (RC Services), an SEC registered broker-dealer and FINRA member firm. RC Services is a wholly-owned subsidiary of ICMA-RC and is an affiliate of VantageTrust Company, LLC and Vantagepoint Investment Advisers, LLC. Learn more at www.vantagepointfunds.org.