Weekly COVID-19 Market Webinar
May 18, 2020
2
S&P 500 Rally Fueled by Policy and Fiscal Measures
Source:S&P Dow Jones Indices LLC, S&P 500 [SP500], retrieved from FRED, Federal Reserve Bank of St. Louis. As of 5/15/20
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2,000
2,200
2,400
2,600
2,800
3,000
3,200
3,400
3,600
3,800
4,000
1/2/2020 1/16/2020 1/30/2020 2/13/2020 2/27/2020 3/12/2020 3/26/2020 4/9/2020 4/23/2020 5/7/2020
April 9th Municipal
Liquidity Facility -$500 B
March 15th
Open Market Purchases $700 B
March 12th
Expanded Reverse Repo Operations –
$1.5 T
3
United States COVID-19 Cases
Data from Covidttracking.com, map from https://coronavirus.jhu.edu/us-map
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0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
U.S. Cumulative Cases Worldwide Daily New Cases
4
U.S. Daily New Cases Declining, Positivity Rate Declining
Source: Covidtracking.com
0
500
1,000
1,500
2,000
2,500
3,000
3/10 3/17 3/24 3/31 4/7 4/14 4/21 4/28 5/5 5/12
U.S. Daily Deaths
05,000
10,00015,00020,00025,00030,00035,00040,00045,000
2/15 2/22 2/29 3/7 3/14 3/21 3/28 4/4 4/11 4/18 4/25 5/2 5/9 5/16
U.S. Daily New Cases
- 50,000
100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000
3/10 3/17 3/24 3/31 4/7 4/14 4/21 4/28 5/5 5/12
U.S. CoV-2 PCR Tests Conducted Each Day
0%
5%
10%
15%
20%
25%
30%
3/11 3/18 3/25 4/1 4/8 4/15 4/22 4/29 5/6 5/13
U.S. Test Positivity Rate
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5
Excluding NY State, U.S. Daily New Cases Stable
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0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000U.S. Daily New Cases
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
3/6 3/13 3/20 3/27 4/3 4/10 4/17 4/24 5/1 5/8 5/15
U.S. Daily New Cases Excluding New York
Source: Covidtracking.com
6
Areas to Watch as They Re-open
0200400600800
1,0001,2001,4001,6001,8002,000
Texas Daily New Cases
0200400600800
1,0001,2001,4001,6001,800
Georgia Daily New Cases
0100200300400500600700800900
1,000
Indiana Daily New Cases
0
50
100
150
200
250
300
Nevada Daily New Cases
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Source: Covidtracking.com
7
Vaccine Technologies
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Traditional Vaccine approaches a) Inactivated viruses (hepatitis A, polio, rabies) b) Live-attenuated virus (measles, mumps,
rubella). Not suitable for immunocompromised or high risk individuals.
Novel Vaccine approachesa) Vectorized Vaccines: Use a non-replicating
virus to deliver the CoV-2 spike protein genetic code. JNJ and AstraZeneca are using these approaches. The first data from a phase 1 study should be available in June.
b) mRNA Vaccines: Encapsulate mRNA that codes for CoV-2 spike protein genetic code in lipids. Pfizer/BioNTech and Moderna/Lonza are taking this approach. Manufacturing may be constrained early on, but could see doses available for front-line workers by YE20 (if it works).
c) DNA Vaccines: Deliver DNA encoding CoV-2 spike protein. Easier to manufacture than mRNA vaccines, but delivery of the DNA is more difficult. Inovio is using this approach.
8
Percent of U.S. Population Under Shutdown
Source: Strategas. As of 5/14/20
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
19-Mar 26-Mar 2-Apr 9-Apr 16-Apr 23-Apr 30-Apr 7-May 14-May 21-May 28-May 4-Jun
9
Green Shoots Begin to Appear
Source: Cornerstone. May 18, 2020.
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“Airbnb bookings in the U.S. are rebounding at an accelerating rate.” (PRnewswire.com, 5/11)
“MasterCard said it’s seeing the start of “normalization,” with purchase transactions showing much smaller year-over-year declines in the past few weeks.” (IBD, 5/16)
“Simon Property Group said: as of Monday, the company had re-opened 77 of its properties in the U.S. and is ‘encouraged by the consumer response thus far’.” (DJ, 5/16)
“Hotels are slowly starting to re-open and global occupancy rates are leveling off, Marriott said.” (WSJ, 5/12)
“For the first time since late March, truckload rates rose on most high-traffic lanes last week. Load posts on the DAT One network also continued to climb with businesses re-opening in some states.”
“AutoNation said car sales already started to pickup at the end of April.” (Bloomberg,5/11)
10
Shape of Recovery
Source: Cornerstone Macro. As of 5/14/20
17.00
17.50
18.00
18.50
19.00
19.50
16 17 18 19 20 21 22
U.S. Real GDP2020 1Q: $19.0 Trillion
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Public Debt as a Percentage of GDP
Source: strategas. As of 5/18/20
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0%
20%
40%
60%
80%
100%
120%
1940 1950 1960 1970 1979 1989 1999 2009 2019
Debt Held by the Public as Percentage of GDP
OMB Projections
under President's
FY2021 Budget
CBO April 2020Projects for FY2020-2021
12
Sovereign Yields Tethered
As of 5/18/2020. Source: Bloomberg
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0.5
1.0
1.5
2.0
2.5 Difference Between 10-Year U.S. and 10-Year Germany
13
Federal Funds Futures
As of 5/14/2020. Source: Bloomberg
0
0.01
0.02
0.03
0.04
0.05
0.06
14
High Yield Spreads
As of 5/15/2020. Source: Bloomberg/Barclays Live
543
749
1,385
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Ba U.S. High Yield B U.S. High Yield Caa U.S. High Yield
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15
Fixed Income Supply
As of 5/15/2020. Source: The Bond Buyer and Bloomberg League Tables
0
50
100
150
200
250
300
350
January February March April May MTD
U.S. Municipal U.S. Investment Grade Corporate U.S. High Yield Corporate
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16 Source: Morningstar. As of 5/18/20
What Stocks are Driving the Rally?
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First Drawdown Following Initial Rally Off Major Low
Source: Strategas. As of 5/15/20
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Market Low Initial Rally # of Days 1st Drawdown # of Days
October 1957 7.0% 26 -5.5% 12
June 1962 14.3% 40 -10.5% 43
May 1970 13.3% 6 -9.3% 23
October 1974 20.8% 25 -13.6% 20
August 1982 23.7% 31 -5.0% 6
October 1987 19.8% 1 -14.7% 31
October 1990 13.4% 39 -7.4% 25
October 2002 24.2% 36 -17.3% 68
March 2009 43.4% 67 -9.1% 18
Average -10.3% 27
18
Asset Class Positioning: Investment Strategy Committee Recommendations
As of 4/1/20.
Underweight Small Underweight Neutral Small
Overweight Overweight
Equity Large Cap Mid Cap Small Cap International Developed Large Cap International Developed Small Cap Emerging Markets Private Equity Private Equity-Real Estate
Fixed Income Treasuries Investment-grade Corporate Tax-exempt High Yield
Diversifiers Real Estate (REITs) Long/Short Hedge Absolute Return Hedge Managed Futures Commodities
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Q&A
Thank You
21
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