June 15, 2020

Covid-19: Tracking the Recovery – June 15, 2020

The sense of relief that took hold as businesses around the country began to reopen was soured by some bleak headlines last week pointing to a resurgence of the deadly Covid-19 virus in certain states. While the number of confirmed cases in the U.S. has now surpassed 2 million, the rate at which this Coronavirus has spread has decreased considerably at the national level. Looser restrictions (as well as an increased level of testing) have however, been followed by not only a recent increase in positive cases, but also a spike in hospitalization rates in some states.

Hospitalization rates in nine states have increased meaningfully since Memorial Day. In California, a state that began reopening later than some others, hospitalization rates have risen sharply for several days and reached the highest level since May 13. New reported cases seem to be predominantly in Los Angeles (where testing has increased significantly) although there have been little to no new cases reported in San Francisco during the same time period. Clearly, the spread has become quite localized.

Texas recently experienced the highest one day jump in new cases and hospitalization rates on record since the start of the pandemic. Total number of cases have jumped 36% in the state since Memorial Day. The resurgence has led officials in the Houston area to warn residents that stay-at-home orders may be reinstituted and a previously established dedicated Covid-19 hospital in a football stadium may need to be reopened.

Arizona is quickly becoming a new hot spot for the virus as reports of new cases reached an all-time high last week. Hospitals are now operating at a concerning level of 83% of capacity with hospitalizations having spiked 49% since Memorial Day. Reports show that North and South Carolina, Mississippi, Arkansas, Florida and Oregon have experienced similar spikes in hospitalization rates as well as total new cases. In addition to these areas, a trailing 7-day average high in new cases was also reported last week in Tennessee, Alaska, Kentucky, New Mexico and Utah.

Epidemiologists are indicating that it is difficult to pinpoint exactly what is causing the rise in certain states relative to others. Outside of the headline-producing surges, many states are experiencing only modest increases in transmission, as was expected. If fact, certain states such as Georgia (one of the first to reopen and remove restrictions) has not seen a discernible resurgence at all.
Previously devastated locations with dramatically high death counts like New York City and highly populated “hot spots”, such as urban areas of Massachusetts, continue to show a decline in cases. New York was one of the later states to loosen restrictions and remains in the earliest phase of reopening. The opening of casinos in Las Vegas has yet to lead to the level of resurgence seen in other parts of the country.

It is yet to be seen if large crowds gathering to protest racial inequality in places like Washington D.C. and Minneapolis will lead to spikes in those areas. Numerous photos from these events showed varied levels of adherence to safety protocols such as wearing masks. Dr. Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases, stated in an interview on the matter that
“masks can help, but its masks plus physical separation” that are needed, clearly not evident with the crowds that formed.

Some states have started to delay previously announced reopening processes. The Governor of Oregon has announced a one-week delay in easing restrictions and the Mayor of Nashville, Tennessee has declared a more open-ended pause in moving out of the current phase of reopening. A Whirlpool plant in Tulsa, Oklahoma was also closed last week due to a resurgence in workers contracting the deadly virus. Other states may begin to follow suit as new data is collected, calling the speed of economic recovery into question.

Investors certainly took notice of the change in sentiment, sending the market reeling on Thursday with a resurgence of volatility, the likes of which we haven’t seen since the onset of the pandemic-related panic in March. If more states begin to reimplement restrictive measures, dampening the prospects of a timely economic recovery, we would expect these types of short-term fits and starts in equity markets to continue. The President and White House officials have stated that a reinstitution of a nationwide lockdown would not happen, so any further decisions to step back reopening plans rest squarely on the shoulders of individual state and local officials.

As always, we will continue to provide you with updates in the most comprehensive, cohesive and timely manner possible.