June 15, 2020
The short-term bearish narrative includes two main risks including escalating US/China tensions and the possible reimposition of coronavirus lockdowns. A third risk around US protests is sometimes cited, but we think it’s far smaller and probably inversely correlated to the other two. We expected US/China tensions could remain elevated but manageable as Beijing policies seem like a popular campaign topic for both parties going into November. Note US Secretary of State Pompeo is now planning to meet with Chinese officials in Hawaii to ease tensions. Similarly, we expect concerns over rising coronavirus case counts to stay elevated but manageable for several months at least. While several US states show increased case counts, the two week average daily infection rates are well-below the ~10% level associated with hospital capacity stress. Meanwhile, the percentage of US states with encouraging epidemiological curves has improved over the last three weeks, hospitalizations (sign of community spread) remain low and mortality rates at states with rising case counts are very low. We’ve learned a great deal to improve mortality rates since March especially around the use of ventilators and for high-risk populations such as nursing homes. We’ve also seen enough statistical data that questions the efficacy of lockdowns vs other measures like social distancing and increased personal hygiene.