The Vantagepoint Market Perspective: COVID-19 in the Rearview Mirror?

06/24/2020

 

After carving out what is hopefully a bottom in late March, the markets notched a hefty rebound in the months that followed. The combination of policy support and economic optimism overwhelmed fears of COVID-19 and the worldwide chaos it brought, leading to hopes that the worst effects would be visible only in the rearview mirror. However, over the past week, evidence of the spread of COVID-19 in both the U.S. and overseas resurfaced with a vengeance.

So far, it’s not clear if the market is correct that the recent spike in cases is just a temporary speed bump that will be quickly overcome or if there’s still more pain ahead.

Here in the U.S., each of our 50 states has taken sometimes differing approaches both to the shutdowns and the reopenings, as well as to the rules that go along with them. And in recent days, in some parts of the nation, there has a been a sharp increase in the number of people not only testing positive for COVID-19, but being hospitalized for it.

For instance, in Texas on Monday, Governor Greg Abbott said COVID-19 is spreading at an “unacceptable rate” after the average number of new cases per day in the Longhorn State spiked to more than 3,500 last week and the number of hospitalizations set a record for 10 days in a row. In response, after new cases hit more than 5,000 a day on Tuesday, he gave local authorities permission to tighten rules for public gatherings and implemented other safety precautions.

Meanwhile, in Arizona, the tally of people testing positive for the virus hit a record 3,246 on Friday. During the week, daily records were also set for people being hospitalized, along with the use of ventilators and intensive care beds for COVID-19 patients.

In Florida, the number of COVID-19 cases is up and not just because they’re testing more people. It’s because the rate of infection is climbing. In addition, the median age of those testing positive has declined as well, falling to the mid-30s from age 65 in March. However, reliable state-wide tracking of hospitalizations in the Sunshine State is lacking, so those rates are undetermined.   

In fact, in the U.S., on a national basis, the seven-day average of new COVID-19 cases had increased 24% from the previous week as of Sunday, according to a CNBC analysis of data from Johns Hopkins University. Meanwhile, hospitalizations had increased in 14 states.

Indeed, the regional focus of the disease seems to be shifting from the East Coast to different parts of the country as the virus works its way across the nation. To a certain extent, this is to be expected.

And in many areas, people have concluded that there’s no way to completely stop the virus’ spread and have tried to resume living their lives as much as possible. This ironically, has likely caused the recent spikes in some parts of the country.

Despite the widespread efforts of biotech and pharmaceutical companies, the prospects of quickly developing an effective COVID-19 vaccine remain challenging. Either way, after months of being cooped up at home, many have decided to reengage with society, which has benefited economic activity, as shown in the record increase in retail spending in May as states across the country began to reopen.

Perhaps there is some happy medium that can be reached that involves what medical experts have been recommending in recent months: reopening cautiously and insisting people wear masks and adhere to social-distancing rules. To date, recent trends indicate that we have not yet achieved this balance. While many people may be resigned to an unsatisfying status quo, the coming months could prove jarring to these attitudes if schools are unable to re-open or even if the return of professional and college football is imperiled. 

In the meantime, it’s not clear if the markets have been right and the recent COVID-19 resurgence is just a temporary hurdle in what will soon turn out to be a full recovery. Either way, the recent resurgence of cases shows there’s a way to move forward, but precautions must be taken, which can help us as a nation avoid sliding backward on both the health and economic fronts.

Disclosures:

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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.