Pro Perspectives 4/17/20

April 17, 2020

As we end the week, let’s take a look at some key charts.

We’ll start with what I continue to think is the most important data in this health and economic crisis — the daily intubations in New York hospitals. 

As you can see to the far right of the chart above, the daily intubations have declined five consecutive days
 
Meanwhile, in this next chart, there continues to be about 2,000 new hospitalizations a day.  Bottom line, the number of people getting to the severe stage (to the stage of intubation) have declined dramatically.  As we’ve discussed, something (a treatment) seems to be working.  And no surprise, since the data has revealed itself, the plans to reopen the economy are now underway. 
With the above in mind, we’ve talked about hydroxychloroquine, which has become a political football.  The FDA approved this drug to be used “off label” for Covid patients weeks ago (including in NY hospitals), yet we’ve heard little, if any, reports on how its working.  The Governor in New York has hosted daily press conferences for weeks now, and decided it’s not important to mention the drug trials and experimental treatments that could give us a bridge to a vaccine (and put a bottom in for the health crisis).  Yesterday, he finally did.  He actually said “maybe hyroxychloroquine works.”  I saw zero reports of that statement in the news. 

But, we did get a hopeful review on the success of Gilead’s experimental treatment (Remdesivir) late yesterday.  What do you know?  The media was all over it.  

Bottom line, as the data show, something is working!

As for Gilead’s stock, it is only up about 12% from the date they announced they were initiated phase 3 studies on this drug to treat Covid, back in late February. That’s strange behavior for a company that has been well in the hunt for a viable treatment. 

Let’s take a look at stocks …

Remember, at the depths of the bloodletting in stocks, we talked about the way historical major turning points in markets are made — they are typically associated with some sort of intervention (in this case, we’ve had the mother load).  And markets can turn well before there is clarity on the outcome (the coronavirus, in this case).  So far, that has gone according to script. 

The S&P 500 has now bounced an astounding 32% since the lows just four weeks ago.  We’re closing in on this key technical level, the 61.8% retracement of the decline.  Between that, and the 200-day moving average, which comes in just above 3,000, I suspect we’ll find the top of a range in stocks in that area. 

From there, stocks will probably trade in a range until we have a better gauge on how the fiscal/monetary stimulus will match up against the timeline to return to normal operating capacity.  Remember, the Fed, Treasury and Congress have essentially plugged a quarter’s worth of GDP.  And there is more coming, which will likely include a massive infrastructure spend.

 

There‚Äôs a substantial amount of runway here, which I would argue, makes for a high probability that it will prove to be an overly aggressive backstop.  That would promote very hot growth in the recovery, and hot inflation.