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This week: Coronavirus – USA; Coronavirus seasonality; Future winners and losers.
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Coronavirus – USA
After Europe, the US seems to be peaking. The number of daily new confirmed cases rose from less than a hundred per day in early March to a high of nearly 35,000 on April 9 where it has more or less held since then. Unfortunately, the still inadequate amount of testing means that any stagnation in this number has to be regarded with skepticism.
The number of reported tests per day nationwide is around 150,000 (not all negatives are reported). Of these, the percentage of positives is still high at 20%, meaning that one of five tested people is shown to have the virus. In New York State, the percentage of positives is as high as 40.5%, and in the US excluding New York, it is 16%. Unless we are going for a herd immunity strategy, we need to see all these percentages under 10%, or preferably under 5%.
At the same time, the number of daily deaths continues to rise as shown in the chart. It is believed that deaths are a lagging indicator and that they peak one to two weeks after the peak in cases. We will see how this plays out in the next week. Meanwhile, it is encouraging to hear that the number of hospitalizations has plateaued near 18,500 in New York State. The worst case scenario has so far been averted.
We published earlier this week On the Seasonality of the Virus in which we find empirical evidence that the incidence of disease varies with a state’s ultraviolet (UV) index and exposure to international travel. States with a lower UV index and higher international exposure have fared worse than states with only one or neither of these factors. This explains that New York City and Washington DC have suffered more than Los Angeles and Miami.
Among a few outliers, Minnesota offers a good case study on how to manage the crisis and perhaps a blueprint for the recovery. Widespread testing will be key to a successful re-opening.
Future winners and losers
Some of the best ideas emerge or advance in periods of crisis. Today, we can already see that home schooling and work at home are two trends that are likely to accelerate in the future. They will not replace schools and office work but supplement them and compete with them. Companies that assist this trend are likely to grow and thrive, including Khan Academy, Duolingo, Scholastic, Zoom (if it can work out its privacy issues) and others.
This trend is marginally (or more than marginally) negative for commercial and institutional real estate if companies and schools decide that they need fewer physical properties.
In addition, it will be difficult for private schools and universities to justify expensive tuitions when a growing segment of students are learning from home. How different is that online creative writing or computer science class taught from an Ivy League college vs. its equivalent at a state university, or for that matter a similar offering from a smaller entrepreneurial group of instructors?
On the health care front, the aftermath of covid-19 will probably see a surge in investment and activity much as the security industry saw in the aftermath of 9/11. Pharma, biotech and medical equipment companies should all see an inflow of funding. In due time, this added competition could result in the long-awaited decline in health care costs.
Education, real estate and health care are three sectors that have resisted the general deflationary trend of the past three decades. This could now change rapidly.
Winners until, or in some cases beyond, full recovery: At home or small group work and schooling; at home or small group entertainment; medical equipment and supplies, pharma and biotech; online shopping; home improvement. More broadly, suburbia and the countryside.
Losers until, or in some cases beyond, full recovery: Hotel, cruising, restaurant and travel; transportation, auto and oil/gas industries; brick and mortar retail; commercial real estate; private schools and universities; stadiums and large venues. More broadly, high density urban environments.
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