COVID-19 UPDATE: U. Chicago Remdesivir study points to Treatment > Vaccine and 'game-changer'? Cases --> steady progress. More thoughts on Strategy "way forward"
COVID-19 remains a global crisis and we realize that many people need to keep up with COVID-19 developments, particularly since we are moving into the more critical stage ("restart economy"), so feel free to share our commentary to anyone who has interest.
This evening, the most significant development comes from the Healthcare side as the University of Chicago's Phase 3 trial of Gilead's Remdesivir shows promise (link --> U Chicago Phase 3 trial update). Remdesivir has been talked about for some time so we can understand if many wonder why this has any significance -- but the fact is, S&P 500 futures are up 100 points (+ ~3.5%).
Policymakers have pointed to "vaccine" as the key development, and with vaccines 6-12-18 months away, the outlook for re-opening the economy is quite grim if a vaccine is key.
But if COVID-19 spread is 10-20X greater than reported, more like 20%-30% in NYC, not 1%-2% as "tested," then vaccines are less important than treatment. This is something we mentioned in several of our comments -- that treatment > vaccine. Think of it this way, a vaccine means the entire USA needs to be vaccinated and if 1% have side effects (just assumption, not a fact), then this would be worse arguably than catching COVID. On the other hand, a treatment means only those afflicted need to be treated and this is not only more scalable but arguably safer. In some ways, this is how the AIDS epidemic attenuated -- by treatment, not vaccine.
But take our observations with a grain of salt.
COVID-19 is a pandemic. It has caused the greatest economic contraction since the Great Depression. It has created considerably uncertainty. And it has compressed news/economic/financial cycles from months to days --> what was normally 12 months of market moves is now happening in weeks.
But one thing we have observed is that control of financial markets has shifted to buyers (the "half full" camp) and this shift took place after March 23, 2020. Consider how we have been receiving completely freakishly bad economic data including today's initial jobless claims (5.2mm, bringing total losses to >22mm) and yet the S&P 500 ended flat (+0.58%) -- never would I have ever imagined 5.2mm jobless claims would lead to an up tape.
The point we are making is that financial markets are now starting to communicate a narrative that seems completely out of sync with what we know lays ahead. The US economy and the global economy are facing a massive contraction and the way forward is so uncertain. But so many financial market indicators strongly argue the S&P 500 has decisively bottomed and a new bull market is underway (50% retracement is more prominent).
I don't know the future and our own notions of the future have been dead wrong. But it seems like stocks are telling us that the economic recovery path is much stronger than people expect.
POINT #1: US net new cases at 30,604, flat vs 4/15, as New Jersey cases increased 100% to 4,287
US net new COVID-19 cases hovered at 30,604 and did not show an improvement from the day prior. As shown, the 30,604 is still off the 34,617, so we can say "apex" is behind us, but instead of a steady decline in cases, the US is showing a stubborn flatness.
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