I wanted to provide a bit of good news in relation to Covid-19.  The Sun Belt wave, which peaked in late July has seen a substantial decline over the last 45 days.  Hospitalizations, ICUs, deaths, and even cases, have dropped meaningfully.  Keep in mind that many deaths we see reported daily actually occurred weeks or even months ago.  Some states, such as Florida, provide very good date of death information, which shows the peak was late July.  Farr’s law of epidemics is that they rise and fall in roughly a bell-shaped curve, meaning they go down as quickly as they went up normally.  This is what occurred in The Northeast and Europe, and now we are seeing the same thing in the Sun Belt.  Covid-19, like other coronaviruses such as SARS and MERS, appears to be highly seasonal, so latitude is very important.  Areas in New Zealand, Australia and Hawaii, which were barely hit before, are starting to see their cases go up pretty rapidly despite very strict measures.  Seasonality is certainly one reason why the timing of outbreaks vary but of course there are many other factors as well, such as density, socialization habits etc.

In Europe, testing and in turn “cases” are up but there is very little rise in both hospitalizations and fatalities.  This is very encouraging news as it shows that once an area meets a certain threshold of infections, the population builds a resistance.  That is what naturally happens with most viruses, as viruses such as the common cold likely originally resulted in past epidemics, but the virility is reduced as they become endemic.   Tragically the virus hit the most vulnerable first in many cases, but as it hits younger and healthier immune systems, the resistance builds up. I think the evidence is quite clear that the worst of Covid-19 is in the past, which should continue setting the stage for further re openings of the economy, and thankfully way less future deaths.

On the economic front, the news has been better than expected, but obviously the economy is still quite rattled.  The August employment number came out 2 weeks ago and the unemployment rate dropped to 8.4%.  That was way better than expectations and is pretty impressive when you consider how many states are still under various degrees of lockdown in key industries such as restaurants, gyms, schools, etc.  One significant negative is the lack of progress on a stimulus package, which is badly needed.  I’ve hoped the two sides could come together, but with the election so near, the knives are out and it is uncertain if that will occur before.  We will see how it plays out but the most important thing to watch is the unemployment rate.

Tech stocks stumbled a bit the last few weeks, declining by over 10%.  While they have still performed remarkably well, I will tell you that the valuations I see on them are some of the craziest I’ve ever seen.  It is the total opposite of value, which is cheaper than it has ever been relative to growth.  Further improvement in the pandemic situation, should be very good for most value stocks, which were disproportionately impacted by the work from home orders.  The last three Presidential elections also were very good for value stocks, despite having two radically different platforms.  Hopefully things keep improving, but I’m very optimistic.  It has been a nightmarish year on many fronts, but often in these storms the seeds for future prosperity and progress are planted!