a LOOK BACK AT A YEAR OF
COVID-19
During this ongoing COVID-19 pandemic, we have collectively experienced a lot of turmoil, but also come a long way since the early days of the pandemic. Looking back to last year, on February 14, the Standard & Poor’s (S&P) 500 was sitting at a 3,380 reading. As we started to receive more data, the picture quickly changed. With a bit of foreshadowing, the U.S. Health and Human Services Secretary Alex Azar, said the US has seen "very limited impact," but acknowledged "that could change at any time."[1] Nearly a year ago on March 20, 2020, worldwide reported cases were 277,000 with 11,476 deaths, of which 25,268 of the cases and 201 of the deaths were from the U.S., according to the U.S. Center of Disease and Control (CDC).[2] From February 14 through March 20, as we continued to receive bad news, the S&P 500 rapidly fell by over 30%, before bottoming at a 2,295 level.
Though the index had bottomed, the bad news was far from over, and cases continued to climb. Fast forwarding to August 11, 2020, the S&P 500 revisited the 3,380 level which was the previous high. At that time, world cases had exploded to over 20 million and 738,000 deaths. In the U.S., cases stood at 5.12 million with 164,137 deaths, as shutdowns continued. In fact, at that exact time, the Big Ten and Pac-12 conferences were indefinitely postponing the college football season, though they eventually backtracked on that decision.[3]
Fast forwarding to April 5, 2021, the pandemic is still ongoing with over 131 million global cases and over 2.8 million deaths. In the U.S, today we stand at just over 30 million recorded cases and over 555,000 deaths.[4] Despite widespread personal losses and business shutdowns, the S&P 500 is up over 75% since the March 20, 2020 lows and up a respectable 19% since the February 14 pre-crash high.
With the COVID-19 cases still climbing, why is the market doing so well? In the chart below, it almost looks like the two factors are directly related, though they are not. In reality, it may be a simplistic answer, but we expect improved performance is a function of the market looking past the current events, and forward to the post-pandemic world that is coming. This forward-looking aspect of the market is likely what contributed to the swift sell-off in the early days of the pandemic, just as it was able to anticipate a future recovery, partially driven by adaptation to innovation and a new normal. Not to mention, the Federal Reserve has been incredibly accommodative with low interest rates, and government action providing needed stimulus. It is also important to note that the stock market and the broader economy are not always affected to the same extent.
Like previous crises, this one has changed the way we live and has led to several innovations. One big factor that has contributed to an improving outlook is the speed at which we can innovate in the medical field and develop vaccines. For example, the Pfizer and Moderna vaccines are first versions of the vaccine that use mRNA (messenger ribonucleic acid) to make proteins in order to trigger an immune response and build immunity to SARS-CoV-2.[5] The improved development time allows for society to adapt more swiftly as the circulating viruses mutate. The Johnson & Johnson version follows the traditional route of using an inactivated adenovirus, however, an important benefit is that it doesn’t need to be stored at as low of temperatures and only requires a single dose.[6]
The ability to adapt and innovate will continue to be important as virus circulation is increasing in Europe, since they have fallen behind on vaccinations and new variants emerge.[7]
In the U.S. we appear to have done a better job with the vaccination effort as nearly one third of the U.S. has received at least 1 dose according to CDC, and we have been averaging nearly 3 million vaccinations per day. This has likely contributed to the improvement in case trends.[8]
A big reason for optimism is that the vaccines appear to be more effective than we could have hoped, according to the table below:[9]
While illness can’t be completely prevented, current vaccines seem to be very effective at preventing death. In addition to the already mentioned vaccines, AstraZeneca is still working on getting approval, but has run into some roadblocks. Their version of the vaccine has been claimed to be 79% effective, but they are working on verifying the data.[10] While an efficacy rate below those of Pfizer, Moderna, or Johnson & Johnson may be disappointing, all should be celebrated for how good they seem to be at preventing severe outcomes.
Despite the efficacy here, there are concerns that the vaccines may be less effective against newer variants that originated in Europe, Brazil, or South Africa. Fortunately, booster shots are being developed using innovative technology[11] by Pfizer and Moderna, while the current iterations of the vaccines appear to be effective at curbing the worst forms of the disease.[12]
Outside of the development of vaccines, it seems we have better guidance on how to treat illness as a result of the virus. For example, steroids like dexamethasone may have saved up to 1 million lives globally,[13] while monoclonal antibodies and antiviral drugs like Remdesivir used early in the course of disease have been promising.[14] There may even be an oral antiviral pill available by summer to help with the management of disease.[15]
Even as we continue to weather the virus, there are likely some changes that will prevent us from ever getting back to pre-pandemic life, as life has changed in numerous ways. The virus has impacted the way we communicate, connect, work, and live. For one, we have all been forced to become more comfortable with doing business online through platforms like Zoom. In fact, in this article[16] and the study, Collaborating During Coronavirus: The Impact of COVID-19 on the Nature of Work, by June of last year, 42% of the U.S. labor force, largely from the ranks of white-collar employees and professionals, was estimated to be working from home. In the study, a team with Harvard Business School, using meeting and email metadata of roughly 3.1 million employees around the world, found the pandemic workday was, on average, 48.5 minutes longer. For many, the expectation is that we will become less reliant on office space, which will enable remote work, cut down on commute times, and reduce overhead and operating costs.
In addition, there have been noticeable changes to the ways that we focus on health. With gyms closing and in-person fitness classes cancelled, many have started to use products like Peloton bikes and online fitness classes. As restaurants closed many began using grocery delivery services, cooking more nutritious meals to boost immunity, and eating at home.
Parents have had to balance their own work and contend with e-learning responsibilities and caring for children, which has had various impacts on their development and productivity. Despite some struggles, there is likely a place for increased online learning and a hybrid work-model to allow for more flexibility. Some believe that greater control over how and when to work leads to greater satisfaction, productivity, and reduced stress.
Our team at The Mather Group has felt the impact of these changes both personally and professionally as well. Early in the pandemic we created processes to enable remote work when necessary and ensure that we could continue to service our clients without missing a beat. We believe the challenges from the past year have helped us demonstrate resiliency and proven that we are well-suited to adaption and innovation.
As the world continues to shift and change, The Mather Group is here to help you, wherever life takes us. Like the changing landscape has necessitated innovation, we too, are working on ways to innovate so that our clients can continue to receive the high-quality service that they deserve.
[1] February 14 coronavirus news, CNN, 14 February 2020
[2] CDC Reports 15,268 Coronavirus Cases, 201 Deaths, U.S. News, 20 March 2020
[3] U.S. Cases Up 0.9%; Texas Tops 500,000 Infections: Virus Update, Bloomberg, 10 August 2020
[4] COVID-19 Dashboard by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU), Johns Hopkins, 5 April 2021
[5] Understanding and Explaining mRNA COVID-19 Vaccines, CDC, 5 April 2021
[6] Johnson & Johnson vaccine: How is it different?, VCU Health, 28 February 2021
[7] ‘Virus metrics are getting uglier’: Why COVID-ravaged Europe is locking down again, Fortune, 19 March 2021
[8] The latest on the coronavirus pandemic and vaccines, CNN, 5 April 2021
[9] Which Vaccine?, Slate, 8 March 2021
[10] AstraZeneca: US data shows vaccine effective for all adults, Associated Press, 22 March 2021
[11] Pfizer and Moderna Are Testing a Third ‘Booster’ Dose for Their COVID-19 Vaccines, Prevention, 1 March 2021
[12] Booster Shots against Scary COVID Virus Variants Are in the Works, Scientific American, 18 February 2021
[13] Dexamethasone hailed as lifesaver for up to a million Covid patients worldwide, The Guardian, 22 March 2021
[14] Treatment for COVID-19 is better than a year ago, but it still has a long way to go, USA Today, 14 March 2021
[15] New COVID-19 treatment pill could be available this summer, ABC15, 20 March 2021
[16] One year later: 15 ways life has changed since the onset of the COVID pandemic, Fortune, 9 March 2021
The Mather Group (TMG) is registered under the Investment Advisers Act of 1940 as a Registered Investment Adviser with the Securities and Exchange Commission (SEC). Registration as an investment adviser does not imply a certain level of skill or training. For a detailed discussion of TMG and its investment advisory services and fees, please see the firm’s Form ADV on file at www.adviserinfo.sec.gov. The opinions expressed, and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The opinions and advice expressed in this communication are based on TMG's research and professional experience and are expressed as of the publishing date of this communication. TMG makes no warranty or representation, express or implied, nor does TMG accept any liability, with respect to the information and data set forth herein. TMG specifically disclaims any duty to update any of the information and data contained in this communication. Charts are shown for illustrative purposes only. The information and data in this communication does not constitute legal, tax, accounting, investment, or other professional advice nor is it intended to provide comprehensive tax advice or financial planning with respect to every aspect of a client's financial situation. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Before investing, consider your investment objectives. Past performance does not guarantee future results. An index is a portfolio of specific securities, the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index. An index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. The S&P 500, or simply the S&P, is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices.
