We wanted to share some thoughts on the myriad of news reports floating around and on yesterday's stock market movement.
Thursday's stock market movement has many asking, “What made the market drop so much?,” and perhaps more importantly, “Will this look like March all over again?” For the first question, the short answer is that investors appear to have focused on negative (and incomplete) news. For the second question, we believe the answer is NO, and we will provide a basis for that belief below.
Here are a few examples of focusing on negative (and incomplete) news stories:
- One of the most highly read headlines in American news yesterday was, “Fears of second U.S. coronavirus wave rise on worrisome spike in cases, hospitalizations.”
- Another headline yesterday read, “Arizona sees alarming surge of more than 1,000 new coronavirus cases daily”.
- Four days ago, we saw a headline that said, “Code Red? Arizona hospitals could run out of beds by July.”
These headlines will clearly cause many of us to question the reopening of the country. Readers of these headlines may be motivated to think that if it is this bad in Arizona, then perhaps we should all stay locked in for longer. Because of this, Arizona and its decision to reopen has been a subject of debate in discussions on the re-opening of the country. Arizona is being used as a model for other states because they began removing restrictions three weeks ago. Since they reopened, they have seen an increase in new cases of Covid-19.
And while we understand and appreciate the debate, these headlines only tell part of the story. We believe the other part of the story they exclude is also important. Because of this, we want to share the "other" side of the news. Here are some facts that have been buried by the negative headlines:
- Despite the rise in hospitalizations, the ICU bed capacity utilization in AZ has only risen from 77% to 78%
- The MAJORITY of ICU beds in Arizona are occupied by non-Covid-19 patients
- The Arizona department of health has reported that there are “surge beds” available to handle increased demand. Surge beds are beds that are available, but not yet “ready” to be used
- The expectation from the AZ Department of Health is that if you need a hospital bed in AZ, there WILL BE ONE AVAILABLE
- The US economy is healing much faster than anyone expected, justifying recent optimism in the stock market and showing the benefits of easing lockdowns around the country
- Non-farm payrolls rose 2.5 million in May, easily beating the consensus expected decline of 7.5 million.
- The private sector did even better, adding 3.1 million jobs
- Civilian employment, an alternative measure of jobs that includes small-business start-ups, rose 3.8 million
- The Treasury plans to keep short-term interest rates low until at least 2023
- The Fed's economic projections show a deep recession followed by above-trend growth thereafter as the economy heals, with no permanent damage to GDP
- A report from the department of labor is expected to show a 0.6% increase in May (vs. its 2.6% decline in April)
- Export prices are also expected to climb by 0.6%
- It is expected that the consumer sentiment survey is likely to increase to 75.0 in May. It came in at 72.3 in April
- Despite the much-reported suspension of dividends in 41 of the S&P 500’s companies, Bloomberg reported that the total dividend for the S&P 50 will total an estimate of $59.08 per share, up from $58.69 per share in 2019. The estimate for 2021 is $61.83
The use of incomplete (even if true) headlines can manipulate public perception. To illustrate this, reporters could just as easily have written the following headlines, all of which are also TRUE:
- Three weeks after reopening, Covid-19 death rate falls!
- Three weeks after opening, Arizona Depart of Health reports only 1% increase in ICU bed utilizations
- Three weeks after opening, AZ reports majority of ICU beds occupied by non-Covid-19 patients
- Unemployment falls in AZ as economy reopens and death rate from Covid-19 falls
We do not contest the truth of the media's chosen headlines, but rather the truthfulness of the message they seek to promote. They do not accurately illustrate the whole story, just as the "positive" headlines above do not tell the whole story despite their being true.
We can only conclude that the media's choice of headlines have the goal of sensationalizing and dramatizing the news. They suggest the reopening of the economy is in peril, and that the U.S. may very soon be subject to new lockdown measures, whereas a full view of the facts might suggest that AZ has so far been successful in its reopening. This would of course suggest that the rest of the country may also be able to successfully remove stay at home orders. A full and accurate reporting of ALL the facts may indeed give Americans a reason to be "cautiously optimistic."
Some are likely still disinclined to believe there is reason to be hopeful. They may point to news articles reporting that AZ has put into action its emergency plans to handle the increase in Covid-19 cases. These reports are accurate, but that does not mean we have reason to despair. Rather, it should give us confidence that our healthcare system did what it told us it would do. If we recall WHY stay-at-home orders were instituted, it was to allow our health care system time to prepare for Covid-19. It was NEVER expected to cure or stop the spread of Covid-19.
When we combine all the data, we see a story where lockdowns were initiated, the spread of the virus was slowed, medical professionals learned a great deal more about the virus, which allowed them to identify some viable treatment options (as well as rule out others) for patients with severe health issues due to Covid-19, and allowed them to prepare to treat many more patients who would become infected with Covid-19. It also allowed each of us to learn more about the virus and decide what course of action is most appropriate for ourselves.
Many of us may have underlying health conditions that increase our risk of serious illness or death due to Covid-19. Others may have less health issues and feel that returning to work or schools is worth the risk. Business and schools across the country have taken the time to improve cleaning procedures, create more distance between people, and provide more options to work or study remotely. They have worked diligently to balance the protection of our health and our economic well being.
Interestingly, if we look beyond the sensationalized news stories, the combination of all these efforts and our own personal decisions seem to point to a path forward. It appears Arizona may have been able to balance public health and economic health. They have allowed businesses to reopen, and they have brought down the death rate for Covid-19. This does not mean we no longer need to be vigilant, but it does mean we may have a path forward. We believe its likely that many of the new cases may not be as severe because those with underlying health conditions are probably still socially distancing themselves from others. We have heard Governors across the country speak of the balancing act between public health and economic health. Perhaps the data in AZ demonstrates that we as a nation can indeed balance these to demands.
We are not doctors or medical professionals, so we do not proclaim to have the all answers. However, as we discussed above, we believe it is important to have all the facts. That said, we acknowledge only time will tell how this all plays out. But a deeper, more complete look at the facts may be of more benefit than sensationalized media headlines.
We understand the reopening of the economy is controversial, but we also know the damage that closing it has caused (and will continue to cause). Our leaders promised to let the data guide them. We hope they stick to this promise. Evidence from places like AZ shows that it may indeed be possible to reopen the economy and have a decline in the death rate from Covid-19.