After the Expected Lag, U.S. Covid-19 Deaths in the U.S. Have (This Week) Turned Higher in Sympathy With the Well-Established Rising Case Trend

Jul 10, 2020 | Nick Scholte


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Falling death rates have been used to counter claims that the pandemic crisis in the U.S. is worsening. If this turn higher in daily deaths persists, it will become much more difficult to push this narrative.

To my clients:

NOTE: I’ve been fortunate over the past few months to be receiving inquiries about my services and have formalized new client relationships as a result.  While clients will know that I intentionally limit the number of family relationships I manage so as to provide a high level of service, I nonetheless do have capacity at present.  If there is anybody in your life not feeling comfortable in the current investment environment, or receiving inadequate guidance, have them contact me or direct them to my website: www.nickscholte.ca

It was an up week for North American stock markets with the Canadian TSX finishing up 0.8%; the U.S. Dow Jones Index finishing up 1.0%; and the U.S. S&P 500 finishing up 1.8%.

Shorter update this week…

U.S. Covid-19 case counts continue to climb, with daily cases now coming in above 60,000 per day. These numbers are more than 50% above the highs seen during the heights of the lockdown in March and April, and more than TRIPLE from the June 7th lows. On the flip side, daily deaths are more than 60% lower than at the March/April peak. Those seeking to minimize the Covid-19 crisis, like the current U.S. President, tend to focus on the decline in the daily death rate. BUT THIS METRIC HAS NOW - TO MY EYE - CLEARLY TURNED UP ALSO. Death rates tend to lag Covid-19 case rates by about three to five weeks as it naturally takes time for the disease to play out to its sad outcome for many of those infected. That said, I do not believe deaths will proportionately spike to the same degree as early in the crisis as diagnosis has improved; care has improved; treatments have improved; and those most at risk have been isolating more than those less vulnerable. But make no mistake – after the expected lag, deaths have clearly turned up this week and, in my opinion, they will henceforth track the direction of the case counts which have been strongly trending up for just over a month now.  I should add that this is not yet a broadly recognized story - I watch the business news all workday every workday, and this emerging change in trend has yet to become a theme on these shows.

As an aside, I had hoped to include a pair of charts illustrating my observations, but copyrighting issues prevented me from doing so. Instead, I’d encourage clients to follow this link to the U.S. data at the Worldometer website. Scroll most of the way to the bottom of the page and note the gray bar chart for “Daily New Cases in the United States” and then three charts lower down the chart for “Daily New Deaths in the United States”. On the “Daily New Cases” chart you will observe the over one month long established upward trend in U.S. cases, and then in the “Daily New Deaths” chart you will see how this lagging metric has begun to turn up just this week. The gray bars in both charts are the actual daily case counts. If you click on the 7-day average under each respective chart, you will see a blue line (cases) and brown line (deaths) overlain on each chart. These 7-day averages smooth out the vagaries of weekly reporting schedules such as the distortions caused by weekends.

The preceding explains my continued cautious stance on the markets, despite economic data that shows a strong reflexive bounce relative to the lows a couple of months ago (on this front, the ISM Services Index came in at a very strong – again, relative to the lows – reading of 57.1). In my opinion, markets have gotten far ahead of themselves in anticipating a recovery and emergence from this pandemic. Will we get there? Yes, absolutely. But I continue to believe, as I have all along, that it will be a more difficult journey than the consensus seems to believe. Accordingly, I continue to anticipate and await a better (read: lower) entry point to bring client portfolios up to a full neutral (or more) position in equities (i.e. stocks).

That’s it for this week. All the best and stay safe,

Nick

Nick Scholte, CIM, FCSI

Vice-President & Portfolio Manager

Scholte Wealth Management
RBC Dominion Securities Inc. │ Tel: 604.257.7569 │ Fax: 604.235.9950
3200-1055 West Georgia │ Vancouver, BC │ V6E 3P3
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