COVID-19 Update for the week ending March 5th, 2021

March 08, 2021 | Matt Barasch


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Chart of the Week

Perhaps no stock captures the impact of rising rates and a shift in sentiment better than Tesla (TSLA), which is up nearly 300% since March 5th of last year and yet also down ~35% over the past month.

 

 

 

We are not buyers of Tesla basically because we think there is too much spice in a story that is long on showmanship, but generally short on actual results. We do find the chart instructive, as some of the names that we very much do like are beginning to resemble the Tesla chart (albeit with much shallower selloffs) and as we often say in times like these, unlike many who will run for the exits, we tend to view times like these as opportunities to add to good businesses at great prices.

 

COVID-19 Update

Globally, cases are approaching 120 million with more than 2.5 million fatalities. Daily new cases have plateaued at around 400k/day as a combination of re-openings and a slowdown in vaccine distribution due to poor weather has weighed on some of the progress made over much of February. With the JNJ vaccine now widely approved, the world now has four viable vaccines to deal with COVID; although, supply constraints are likely to persist for some time to come.

 

The Good News

Nearly 300 million vaccines have now been administered worldwide:

 

 

 

Israel has now administered at least one dose of the vaccine(s) to more than 50% of its population, while the U.S. is now administering more than 2 million doses/day. The U.S. announced during the week that it expected to have enough vaccine to cover its entire population by the end of May, while the Johnson & Johnson vaccine was officially approved in Canada.

 

The Bad News

As mentioned, the new case count after several weeks of sharp declines has now seemingly found its bottom at a level of around 400k/day. This is roughly the levels we were at in late October, which was hardly a time that we were celebrating our successes, and about double where we were at the Summer 2020 lows. Further, we have seen continued politicization of the vaccines with Italy stopping shipments of the AstraZeneca vaccine to Australia largely because AZN has failed to meet its EU delivery timelines.

 

Market/Economic Update

The themes of last week continued to prevail this week with a continued push higher in long bond yields (please see our missive from last week for more on this – we have reinserted at the bottom of this email in case you missed it) weighing on stocks. The concern remains inflation; however, we would caution that we have seen this movie many times before over the past two decades and while they can be painful and worrisome in the moment, our approach remains patience as we believe there are some powerful forces at work that will likely offset the rise in bond yields sooner rather than later.

On the economic front, the U.S. reported non-farm payrolls for February, which showed a much better than expected near-400k gain in new jobs. As we have been saying, we expect a significant rebound in growth with the U.S. looking at a very strong Q22021 through Q22022, while the Canadian economy is likely to lag that by one quarter largely because of the slower pace of vaccine distribution.

 

Final Thoughts

We are approaching a very strange one-year anniversary as it was the upcoming week in 2020 when the world went from mildly concerned about COVID-19 to a complete shutdown in what seemed like a matter of minutes. In our conversations with many of you, we sense optimism toward what the future holds, mixed with some trepidations about the near-term risks that remain. And while we do not expect things to return to “normal” for some time to come, with the weather set to turn warmer (although you would not know it from Toronto this morning), a sharp ramp-up in vaccine supply and distribution in Canada approaching, and a greater appreciation for the little things (I have embraced the short conversation with my kids throughout the day about random events – something I was not able to do for much of my career spent in an office or traveling), we are very optimistic about what is soon to come.

 

Be Safe,

Matt & Ann-Marie