May 18, 2020
First, on Friday afternoon, Trump announced "Operation Warp Speed" which includes the funding and manufacturing of vaccine candidates, which would (in theory) have a vaccine ready to roll out the moment it's approved. Who approves a vaccine? The FDA. Who has already proven to have tremendous influence over the FDA timeline? The President.
In short, the expectations have been reset on the vaccine timeline.
As we've discussed, the expectations bar on the health crisis has already been set very low. That sets the table for positive surprises. And markets like positive surprises. Add to this, we had news this morning on success in a Phase 1 trial from Moderna's vaccine.
So, aside from a vaccine (which may or may not ever materialize), where are looking for clues on how the reopening of the economy is going? Georgia.
With that, remember Georgia reopened for business on April 24th. We are now twenty-five days in. This is well within the window of time where we would see symptomatic people tested, and show up in the new infections/new case data.
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As you can see in the chart above, a spike hasn't happened. The path has continued lower, following the peak in mid-April.
Again, as we discussed last week, what’s the difference between now and two months ago, that might give us more confidence about the path? 1) Symptomatic people can get tested (much more easily) and quarantine. 2) There are behavior and process changes (both from consumers and businesses). 3) There are treatment options. So Georgia has been the spot to watch, to gauge how optimistic (or not) we should that the bottom is in for the economy. All looks good. Speaking of the bottom in the economy, (Fed Chair) Jay Powell followed the script of his predecessor Ben Bernanke last night, and spoke directly to the public through an exclusive 60 Minutes interview. These interviews, where the Fed chair is explicitly reassuring the American people, has become a buy signal for stocks. Back in March 2009, Bernanke (Fed Chairman at the time) sat in front of a camera in an interview on 60 Minutes, explained what the Fed had done to support the economy, and said he was seeing signs of "green shoots" in the economy. If you bought stocks at the open the next day, you felt 11 points of pain in the S&P 500 over the next 24-hours, and then 2,643 points of gain over the next eleven years (i.e. that was the bottom). Now, this is Powell's second time in front in front of the prime time camera. Last March, in response to a 4% one-day plunge in Chinese stocks and some loss of momentum in the U.S. stock market rebound, Powell did a 60 Minutes interview, to reassure the public that the economy was in good shape, and that the Fed was there to ensure stability. If you bought stocks on Monday morning, you made 8% in two months and went on to new record highs. |