Last weekend I noticed total cases from Saturday to Sunday showed a decline in growth from 12.7% to 8.5%. In my experience, the media doesn't notice declines in growth, but will take notice when the raw numbers decline - which they also did. Growth declining by 1/3rd also shows up in the raw numbers, which the media commented on.
There was diplomacy on the oil price war, which may have been resolved. And President Trump planned a special press conference for Thursday, which hinted at a 4th relief package. Either of those events coming true would lift markets. Putting together fewer COVID-19 cases per day, and possibly positive events, I predicted a good week ahead.
I was already 100% stocks, but had opened a margin account. So on Monday I went up to 120-125% stocks with a margin loan. Neither of the positive events transpired Thursday, but "bending the curve" is working, and New York's peak demand may be better than the worst cases.
https://covidtracking.com/data/us-dailyWith that sense of optimism, I compared China and U.S. data by hand.... and my optimism took a hit. The U.S. looks like China's data from 2 months ago, suggesting 2 more months of lock down. Has the market really priced in months of lock down and then time to recover while still afraid of COVID-19?
https://finance.yahoo.com/quote/VTI/performance?p=VTIYahoo Finance shows VTI (total stock market) has a YTD performance of -14.5%, which is not bad for a country where every state has a lock down order, followed by an uncertain opening of the economy. I now felt markets could be wrong, but I had to check the data much more carefully.
https://github.com/CSSEGISandData/COVID-19/tree/master/csse_covid_19_data/csse_covid_19_time_seriesJohn Hopkins provides time series data for every country, including China, with raw csv files. I downloaded their data, uploaded it into a spreadsheet, and added up the totals for China over time. I divided the total number of cases by the prior day's total in my private spreadsheet. Here's an interesting section:
15.75% 11.47% 11.52% 7.93% 8.19% 6.34% 4.80%
China spent 2 days near 11.5% growth, 2 days near 8%, and a couple days in 5-6% range.
I went back to the us-daily data, but also dumped that into a spreadsheet instead of just doing it by hand. I took each day's total, and again divided by the previous day (just like I did for the China COVID-19 data). Here's a series from that data:
15.61% 14.69% 14.79% 13.30% 13.04% 13.18% 12.18%
8.40% 8.58% 8.36% 7.65% 8.03% 7.46%
Where China spent a couple days at both 11.5% and 8%, it looks like the U.S. spends 6 days or so at those same points. It looks like U.S. cases are falling twice or three times as slowly as China's. Instead of China's 2 month lock down, I'd have to guess the U.S. needs to lock down 3+ more months (sorry!). That, in turn, suggests the 2020 Q3 impact is more severe than people think. I'm assuming this trend holds for weeks or months, rather than growth collapsing quickly.
I predict a bad week ahead. I predict some time this week, President Trump will extend the lock down by at least 2 more weeks. If he doesn't, governors will start calling to extend the lock downs, and may take it upon themselves. I expect most people will view this badly, and spoil their optimism, and cause markets to drop.
OPEC+ almost agreed to a small production cut, and the market didn't like the result. And even that has been called into question by Mexico refusing to sign. If they agreed to it, it's not enough, and they don't even have agreement. It looks like Senate Leader McConnell pushed a bill he knew would fail, just to blame House Speaker Pelosi. That delays a 4th relief package, and is why President Trump had nothing special to announce this past Thursday.
I almost forgot, I'm also disappointed with U.S. testing. About 25% of people tested get a positive result, which is too high. Testing should be more than double the current levels, instead of hovering at 150k tests/day for the past week. It's actually growing very slightly slower than the virus, instead of the exponential growth when it was focused on by Dr Brix (lead of the White House task force). Right now, contact tracing is not possible - I've heard anecdotal news stories of people being declined tests. It all fits, and suggests not taking testing as seriously as 2 weeks ago.
Based on the bad news for this week, and probably weeks ahead, I plan to sell stocks and pay off my 20-25% margin loan. I will probably drop somewhere below 100% stocks, but haven't decided how far. If I'm wrong, can the market really recover +17% this month based on current conditions?
(YTD -14.5%. Dropping from 100 to 85.5 is a -14.5% drop, going from 85.5 to 100 is a +17% gain).