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One year ago today, on March 11, 2020, the WHO declared Covid-19 to be a global pandemic. That night, the NBA cancelled a game, ands then its season; soon after, other sports followed.
The market sell off accelerated.
Back in November 2020, I made the shocking observation that we were ~halfway though: The pandemic lockdown that began in March of 2020, and my best guesstimate for herd immunity/reopening – meaning, for life to begin to return to normal, back to work, mask-less social interactions, public events, etc. — was sometime around June 2021. That date looks even better as of today.
If June is our end date, then today we are at the 75% mark.
Let’s consider why this is so, and what the next 6 months might look like.
Perhaps the biggest difference between this White House and its immediate predecessor – aside from much less Tweeting/Gaslighting – has been the move away from a Laissez Faire approach to managing the pandemic, and towards a top down, Federal government managed, hands on approach.
This is the most significant distinction between 46 & 45. That, and the 535,000+ American deaths, of which anywhere between 40-60% were likely avoidable.
The Biden administration invoked the Defense Production Act (DPA) to bolster vaccine production, boost the availability of at-home and point-of-care virus tests, and increase the supply of critical shortages in personnel protective equipment such as masks, shields and gloves.
The results? Increased vaccination rates, with anyone who wants a vaccine able to get one by May 2020. (Don’t plan on showing up in my office without proof of vaccination).
Imagine if in 1940 POTUS announced “The free market will deal with the Nazis.” Hence, the 535,000 excess deaths in 2020.
The lesson for the future: Do not expect competent governing from people who do not believe in government, and insist it cannot accomplish very much.
My wife & I went to NYC’s Javitz Center Friday to get vaccinated. Almost 9,000 people a day get processed/vaccinated there. Its now 24 hours a day: Pfizer 2 shot during the day, Johnson & Johnson at night. The goal is to hit 25,000 daily vaccinations, then they open the other half of the immense conference center, targeting 50,000 daily vaccinations.
It was run with military precision, mostly because it’s mostly uniformed Army personnel managing it. Arrive at the checkpoint, show ID, appointment info, medical docs, move to the next phase Eventually, you get to a person who asks questions likely drafted by Pfizer’s attorneys: medical history, allergies, reactions to vaccines, shots, etc. Onto a smaller line before you are assigned to a two person vaccination station; a few more questions, and you get a shot followed by a 15 minutes in the waiting area in case of reactions. In and out in ~90 minutes.
this weekend tomorrow, we should cross a big number: 100+ million Americans vaccinated; worldwide, we are coming up on 350 million doses given.
Covid Rescue Plan / Stimulus
The 3rd Cares Act is a $1.9 trillion dollar rescue plan that sends $350 billion in state and municipal funding to help with the vaccination process. The rest of the cash includes an extension of unemployment insurance. It sends out $1,400 checks, expands the tax credit for children.
It will be a boost to the economy and a lifeline for many. This should push through to food, rent, health care, tech, home improvement, and most importantly, employment.
As we have discussed previously, there will likely be some transitory inflation. But it is not the sort of sustained increase associated with long lasting, problematic price increases. The Fed continues to assure all that Federal Fund Rates will stay low until 2023.
Reopening the Economy
Assuming the above is correct, some form of herd immunity will appear by June of this year. By then, 75-100 million Americans will have had Covid, and another 100-150 million will have had their vaccinations. This will get us to the point where the process of normalization will start in earnest.
How will we experience re-opening?
As fear levels subside, people begin to do what they used to do: We will all start to gather in groups — first family, then work and friends. We will go out to restaurants again; we will shop in retail stores, go to bars, concerts, plays, museums, shows. Business travel returns, including conferences. No one will hesitate to get on a plane or travel.
As we return to normal, there will also be changes: The Monday to Friday 9 to 5 routine is in danger. Offices will have to learn to adapt. Technology becomes even bigger in our lives, and while there will be a bit of a reset, there is no going back.
The Stock Market
I have not bought into the argument that this bull market is ending anytime soon. While there are plenty of signs of froth, there are also lots of signs (breadth, etc.) this remains a viable, secular bull market. The action lately feels less like a top than a sector rotation. The market may be pricing in an even bigger economic boom caused by re-opening than many realize. Hence, energy, finance and other cyclicals are feeling the love.
Just because we have had a large run up does not mean that the market must crash; we can also work off some of the excesses by going sideways for a couple of quarters (or longer).
Remember, bull markets don’t die of old age, they are killed by policy mistakes.
Finally, I hope you have used your time at home well — that you have worked on whatever it is that interests you, that you have become better/smarter/healthier/happier more present, more informed, and more appreciative of the insane period we are living through.
UPDATE: March 12, 2021
Spoke with a surgeon who pointed out we may even be closer to herd immunity than we realize. Asymptomatic infections may be 3-4X whats been reported, suggesting more than ~100m Americans ALREADY HAD COVID. Now add in 100 million vaccinations in the USA and we are probably much closer to that magic 65-70% Americans with antibodies needed for herd immunity.
The Halfway Point (November 20, 2020)
Pandemic Year Total Returns (March 4, 2021)
Stop Stressing About Inflation (February 11, 2021)
Stimulus, More Stimulus and Taxes (January 25, 2021)
How Externalities Affect Systems (August 14, 2020)
End of the Secular Bull? Not So Fast (April 3, 2020)
Old Age Isn’t What Ends a Bull Stock Market (August 24, 2018)
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