Stay in your lane, bro. That sentiment is no more clear than in the markets. I read many articles from authors that have zero background in epidemiology or public health and yet purport to give advice to public officials about how Covid-19 should be handled. Those articles are just so much noise. I am all for leaving science to the scientists.
That said, the number one job of an equity analyst in 2020 is to be a data scientist. A close second is financial analysis with (hopefully) some knowledge of accounting, but with an avalanche of data out there, market pundits need to know how to crunch numbers. I am not going to tell anyone to wear a mask, not wear a mask, etc., but those who look at stock prices know that Covid-19 news flow has been driving day-to-day market movements, especially this week.
I applied my data analysis skills to the readily available covid caseload data ( I used Worldometers data set) as crunching numbers is, for better or worse, what I do. The bottom line, sadly, is that Covid-19 is not going away. In fact it is increasing in parts of the world where it might be expected to be decreasing, while the prevalence of SARS-CoV-2 (the virus that causes Covid-19) is also increasing in the winter-bound countries of the Southern Hemisphere, where it could be expected to be increasing.
The seasonal pattern that might be expected from a normal influenza strain (this article from NIH explains why flu is more prevalent in winter) is not fully apparent with Covid-19. As a human being that scares me. As an asset manager it informs my investing decisions.
The most important Covid-19 data set is new cases. What we are trying to determine here is the speed of the spread of SARS-CoV2, not whether it is spreading at all.
The U.S. is number one in new cases, but the following countries are more worrisome: India, Brazil, Russia and South Africa are numbers two-five. While all populous countries, two of them are in summer (the forecast high for New Delhi is 101F today) while two are in winter (the forecast high for Cape Town today is 60F.) There is no seasonal pattern in the new cases data, and my fervent hope that "hot weather will kill this virus" does not appear to be the case.
Another important metric is total cases per one million of population. Again the raw data here is not showing me what I wanted to see. I may be short stocks, but I am long humanity. I don't like to see people die.
Excluding the tiny countries, the top six in this metric are Qatar, Bahrain, Chile, Kuwait, Peru and then the U.S. The Southern Hemisphere shows up, as would be expected, but I have no idea why the Middle East is so strongly represented. Another fervent hope of mine was that population density would prove to be a minor factor, given that so much of the world's population lives in cities (84% according to the European Commission) and that about 88% of the world's population lives in the Northern Hemisphere. Isolate the populous areas and hope that summer will save us.
Again, the numbers clearly show that that is not the case. Bahrain, the island off the coast of Saudi Arabia, is number three in the world in population density and number two in Covid-19 cases per million. In that sense, the massive rise seen in new cases in Bangladesh, the sixth most densely populated country in the world, is very revealing. It's also very scary, as the high temperature in Dhaka on Friday is forecast at 90F.
The bottom line is that hot weather is not killing SARS-CoV-2. The virus is continuing to spread through the densely populated Northern Hemisphere just as the Southern Hemisphere is showing a massive increase in cases, which might have been predicted by seasonality. This is bad. The world will likely record its 10 millionth Covid-19 case and 500,000th Covid-19 fatality by June 30th. This is really bad.
If stocks have risen on the hopes of Covid-19 fading, then that move has been built on a shaky foundation. Stocks of groups that have anything to do with travel -- airlines, cruise lines, Boeing (BA) -- should not just be avoided, but actively shorted here, a strategy I am using for my firm.
Until we see a vaccine, I believe the world economy will be in the throes of Covid-19 restrictions -- even as governments partially lift lockdowns -- for the rest of 2020. Planet Earth has had a hell of a first half. I just don't see it getting better in the second half.