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This week: Trump illness; Coronavirus third wave – USA and New York; The K recovery market; Polarized Media; Reading List.
Outpourings of affection from one side and shameless schadenfreude (joy at the misery of another) from the other were the unsurprising reactions to President Trump’s contraction of the coronavirus. The latter is unfortunate irrespective of one’s political convictions: it is better for all of us if polarization and disagreement are resolved through debate and at the ballot box rather than through the incapacitation or death of one candidate. Those who are secretly (or openly in rare cases) wishing for the President’s demise perhaps believe that Trumpism would die with him. It probably would not. The forces that elevated Trump preceded his 2016 candidacy and indeed will most likely outlive him.
Momentum in the national mood (or a section thereof) is bigger than one individual. In fact, it probably precedes that individual and only takes the form of an individual when such a person comes forward to assume the needed role. Trumpism then will live or die at the ballot box, not through the mere survival or forced withdrawal of its temporary embodiment.
When the President recovers, as is most likely, he will resume campaigning but will have to contend with possible sequels of the infection. Can he be effective enough in the closing weeks of the campaign to prevail over Vice-President Biden? We shall see. It is not clear whether his ordeal will help him or hurt him on November 3rd. Some will feel more sympathy towards him, while others will rue the behavior that led to his infection.
In the unlikely event of Trump’s incapacitation, Vice-President Mike Pence would be the probable nominee. What are then Pence’s odds against Biden? We see them as a wash vs. Trump’s. Pence will not elicit the same enthusiasm as Trump. But he also will not bring out as many Democratic voters in opposition. A friend also mentioned the logistical difficulty of replacing the names on millions of ballots and distributing those ballots at a late hour before Election Day. Given some people’s lack of trust in the process, this would add yet more drama to a year that has already seen too many.
Coronavirus Third Wave in the USA and New York
Two weeks ago, we mentioned the return of the pandemic in Europe and speculated that the same may happen in the USA as temperatures cool and schools reopen. The latest figures show a new rise in the numbers of confirmed cases but one that is closely tied to an increase in the number of PCR tests. There is so far no discernible acceleration in the positivity rate from about the 5% nationwide level where it has been since late August. On the other hand, the pandemic will not subside as long as we are at or near 5%.
In New York state, the daily percent testing positive was below 1% since late July and it has risen modestly to the 1 to 1.5% range in the past week. Some people attribute this to schools reopening and after school activities restarting or to social and religious gatherings for the Jewish High Holidays. Whatever the case, this is not yet a cause for alarm but should be watched closely.
In New York City, the number of daily confirmed cases has moved up to its highest level since early June. But as shown in the charts, it remains at 90% below its worst phase in the spring.
Nonetheless, the Cuomo briefing is back.
The K Recovery Market
Some people collect pairs of contradictory proverbs, for example “the early bird gets the worm” + “the second mouse gets the cheese”, or “actions speak louder than words” + “the pen is mightier than the sword”. In the markets, we have “the market climbs a wall of worry” + “the market hates uncertainty”. This type of doublespeak seems tailor made for 2020. The market ignored the pandemic week after week in February, then crashed hard in March only to recover to new highs in August.
The market is of two minds, as evidenced by the K recovery with some sectors such as tech and pharma doing well and others such as energy, travel and retail still languishing. The difficulty that the stock market now faces is that the upper arm of the K seems fairly valued, or arguably overvalued, while the lower arm is still experiencing deteriorating or stagnating fundamentals.
Once the uncertainty of the election dissipates, the broad indices will move higher under one or both of these two conditions: 1) a new stimulus deal that further pumps money into the economy and further expands valuations of the upper arm of the K, or 2) a recovery in sectors that are in the lower arm of the K. Still looming as a risk in the event of a Biden victory is the possibility of investors realizing gains before the end of the year in order to lock in favorable capital gains tax rates ahead of a possible Biden increase in 2021. The probability of a sell-off under this scenario would be greater if the senate also flips to the Democrats.
As to the stimulus now being negotiated by House Speaker Pelosi and Secretary of the Treasury Mnuchin, it is a fair bet that there will be agreement as we get closer to Election Day.
It is no secret that the media has become polarized as never before. Matt Taibbi’s presentation in the video linked below explains the decades-long evolution that brought us to this point. It may be a good idea for everyone’s sanity to swap half the staff and guests at CNN and Fox News, if only for a week. We can after seven days evaluate whether it was a worthwhile experiment. The cause of getting along would be helped, but ratings may fall for both channels. That is the problem for them.
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