This compilation includes all of our research to-date on the coronavirus. The high frequency charts on infection, mortality, economic and market data are updated as data becomes available; asterisks (*) indicate recent updates.

What’s new: all infection/mortality/weather charts, and a China lockdown relaxation and infection tracker (Section 1); update on COVID-19 anti-viral development and the history of anti-viral drugs since 1963 (Section 2); impact of Fed announcements on fixed income markets (Section 4)

The asterisks (*) below indicate which sections have been updated.

  • Latest infection and mortality rates by country/region/state
  • Infections by latitude, temperature and humidity
  • What happens next in China? Relaxing the lockdown and the risks of a second wave
  • US infection and activity tracker

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  • Understanding the basics and the timelines for anti-viral and vaccine development
  • The Chloroquine Controversy
  • When can people who have recovered from the disease go back to work?
  • A history of anti-viral drug development since 1963
  • Detailed table of medical research underway

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  • Mortality rates by country*, and comparisons with prior pandemics
  • Important pandemic definitions (i.e, "infected" vs "sick") and why they need to be interpreted carefully
  • COVID-19 vs Spanish flu: the role of secondary bacterial infections and W-shaped mortality
  • COVID-19 vs SARS (reproductive rates, serial intervals and pre-symptomoatic transmission)

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  • Leveraged fund and asset manager US equity futures positions, and quantity on loan of SPY ETF
  • Current S&P valuations and changes compared to largest changes in history; S&P 100 implied volatility
  • How US regional bank stocks are already pricing in global recession
  • The decline in treasury yields and its historical impact on manufacturing
  • One year returns after the worst one-day S&P 500 market declines in history
  • Fixed income spread tracker (high grade, high yield, asset backed, EM, mortgages, loans and preferreds)
  • A history of asset prices bottoming before crisis indicators improve

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  • Economic history of calamity and recovery since the 1700’s
  • What’s priced into markets from COVID-19 compared to prior earnings recessions

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  • The importance of rapid response times: a lesson from the Spanish Flu epidemic
  • The consequence of Chinese information repression on outbreak severity in Wuhan
  • The impact of Wuhan travel bans and public policy on infections within China, and exported from China

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  • COVID-19 outbreak patterns as a function of latitude, temperature and relative humidity
  • Temperature, humidity, sunlight and other seasonal factors observed in SARS and influenza epidemics
  • What does it take to control a virus outbreak (the importance of timely and aggressive contact tracing)
  • The important difference between initial and effective virus transmission factor (R0) estimates
  • How long does COVID-19 last on different surfaces?

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  • Mortality and reproductive numbers for communicable diseases
  • Testing rates by country; hospital beds vs infections; US outbreak forecast; Iran healthcare data

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This compilation incorporates research and feedback from the Johns Hopkins University Center for Health Security, Harvard Medical School, the University of Toronto Dalla Lana School of Public Health, the Imperial College of London Department of Infectious Disease Epidemiology and the National Institute of Allergy and Infectious Diseases at the National Institutes of Health.

 

COVID-19 update: infection rates, medical research and equity markets

Michael discusses the coronavirus latest infection rates by country and latitude, anti-viral and vaccine efforts, and what equity markets are pricing in.

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FEMALE VOICE:  This podcast has been prepared exclusively for institutional, wholesale, professional clients and qualified investors only, as defined by local laws and regulations.  Please read other important information which can be found on the link at the end of the podcast episode.

MR. MICHAEL CEMBALEST:  Good afternoon, this is Michael Cembalest with the late March Eye on the Market podcast.  Obviously a lot of things have happened since I last recorded a podcast.  I think the best use of time on this one is to share with you some of the materials that we’ve put online and what are the most important things to look at.  So any of our clients will have access to an online portal.  And even if you’re not a client, you have access to it, an online portal that has all of the materials we’ve published so far.  And we update all of the mortality and infection charts that we have in there every day or so, so everything in there is refreshed and as well as any of the latest market, economic, or virus-related research that’s come out.

I just want to touch on a few things that I think are interesting to look at.  The first thing is we have a chart that looks at infection rates by region, and the differences here are pretty dramatic, just in terms of not just China outside Hubei, but Japan and the rest of developed Asia having such a dramatically slower rate of infection per million people than Europe or the United States.  And I think it’s important to look at some of the tools that are being used in developed Asia.  And let me just give you a couple of examples of this.  Contact tracing has become an important concept, in other words, not just quarantining or isolating people that are infected, but also tracing their contacts and making sure those people isolate as well and don’t infect anybody else.  And it’s critically important for a disease that apparently makes you infectious to others before the symptoms show up, which was not the case with SARS.

So just listen to this; listen to some of the tools that South Korea is using to conduct contact tracing.  They check your medical, a record of your use of medical facilities and pharmacies and for what reason.  They use global positioning tracking of your movements by your cellphone.  They look at your credit card transaction logs to figure out where you went and who you were in contact with.  And they even look at closed circuit television records to see where people were going, were they wearing any masks, and were they coughing. 

Now I can imagine a lot of people in the United States, including some people listening to this podcast, being violently uncomfortable with that kind of government surveillance.  But if you are going to ask me what accounts for the dramatic difference between the infection rates in Asia and the United States, that’s it.  And remember South Korea has gotten control of this infection so far, even without having to impose a broad society-wide lockdown and a quarantine.  And so I think that this whole episode is going to raise some important and interesting debates about what the state can do in a pandemic and what the state does well and what the state doesn’t do well and what are the issues around privacy that may need to be rethought in light of these kinds of pandemics.  

The other charts that in here are important to look at, there’s a lot of debate about this whole question of temperature latitude and humidity.  Academic papers are flying fast and furious around where people are debating this.  We’re going to get involved in the debate to the extent that we’re tracking the data.  And so far some of those geographic and temperature and humidity considerations seemed to be holding.  Around 92% of all the infections are taking place within a latitude band in the northern hemisphere where 55% of the world’s population lives.  So there does seem to be something to this, and we have a bunch of charts in here that track this, and that’ll be important for us to understand as we go forward.

Third important topic, and I think I’ve got four or five I want to discuss, and then I’ll let you go, third important topic is to look at the early tests from chloroquine and some of the other drugs that seem in the tests and cell cultures and with very small non-randomized live trials to be effective.  Again, some of these things work differently outside the lab than in the lab, and you need to do trials with large numbers of people, and there have to be control groups.  And anybody who understands this epidemiological science knows that.  

But so far, chloroquine and Remdesivir and some of these other drugs look like they might help.  It’s important to understand what you’re getting with an antiviral.  Antivirals are different than vaccines of course.  Antivirals can help reduce the mortality rate for people who have the infection.  They can slow the rate of infection in hospital settings.  They can reduce the infection rate of family members who might be exposed to it, and it’ll certainly reduce the severity of the disease, which requires hospitalization.  So a lot of good things can come of it.  Antivirals generally don’t help you with whatever community transmission is taking place; you need vaccines for that. 

But so far, and we have a couple of charts in here, there does seem to be some promising news on antivirals.  And I think the hard question will be in four weeks if the trajectory of new infections is slowing sharply, which one would expect that it would, and if this anti-viral medication seems to be effective in terms of reducing mortality risk, will the government relax the quarantines. 

And then on this question of relaxing quarantines and the risk of a second wave, maybe the most important charts that we have in all of our compilation are the ones that look at China.  And so China has meaningfully, not totally of course, but they have meaningfully relaxed the quarantine and lockdown provisions that have taken place and have not yet experienced a second wave.  Maybe it wouldn’t happen right now, maybe it would happen in the fall, maybe it would happen over the summer.  We just don’t know.  

But what is interesting is if you look at our chart on steel demand, railway, coal consumption, home sales, subway riders, subway riders were 10% of normal levels in February, middle February after Chinese New Year.  They’re now at 50% of normal levels.  That’s a big jump.  And for that kind of public transportation density to be taking place and for China not to be showing any reported surge in infections, I think is important.  So that’s something that we’re watching pretty closely.

And the last topic for today is a chart on what’s priced into equity markets.  We have a chart in here that shows what might be priced in.  Now this is not exact science.  There is something called the dividend futures market.  It’s not super-liquid.  It’s got some issues with it, but you can use it as a way of extrapolating what the market’s pricing in as a general sense in terms of earnings growth over the next few years.  And we have some iterations here where we look at different payout ratios.  And one of the more bearish ones shows no recovery in earnings to the prior peak that we had last year by the end of the decade.  And even the more optimistic one, the earnings don’t reach the prior peak until 2028.  So to me, basically that’s the kind of trajectory of earnings that you get in a depression, like the Great Depression.  

And so what the markets are really saying right now is are we going to have another great depression or not?  It seems to be a Great Depression level of earnings recovery being priced in.  And so the Eye on the Market that I sent out the other day, we looked at John Stuart Mill and the history of calamity and what are the kinds of things that take many years to recover and what are the kinds of things that recover more quickly, and the history of markets recovering way more quickly than the crisis manifestation indicators in terms of defaults and bankruptcies and bank failures, that’s really where long-term investors need to be looking right now, which is at what point are markets pricing in outcomes that are worse than the actual historical recovery rates outside the Great Depression?  I personally don’t believe that with what the Federal Reserve showed that it can do in 2008 in terms of providing credit facilities to the banking system, into large businesses, and in terms of what the government might be able to do in terms of providing credit and facilities indirectly to small business, and we’ll see how effective that is.  McConnell’s got something cooking, and there is no shortage of people at the American Enterprise Institute and Brookings.

And for anybody who said there’s not a lot of intellectual capital in the administration, I’m not going to argue that with you.  If that’s what you believe, I’m certainly not going to argue that with you.  But there is plenty of intellectual capital floating around outside the administration that’s providing ideas.  And so at some point, some of those things will be effective, and a lot of those tools didn’t exist during the Great Depression.  And even more importantly, and this was the main point of the Eye on the Market, we’ve had a sea change in the effectiveness of the medical industry in terms of using artificial intelligence and big data to find solutions.  

And so to me I’m almost less interested in the fiscal and monetary solutions, because to a pandemic the most important solutions are medical, right.  When is it safe for people to have mass gatherings and transportation and go back to work again?  And so it’s the medical solution, and to believe that a year from now that we won’t have both a suite of antiviral and vaccine medications on the horizon, I think is to bet against the history that we’ve seen from the global medical community over the last 20 years.  And so that’s why we spend so much time in our webcast and in our online materials talking through individual solutions and what are the live trials showing us and things like that, because you need a medical solution to a medical pandemic, and you need financial solutions to a financial-type pandemic. 

So that’s enough for this week or month or whatever, and I will share more thoughts with you soon.  We’ve started tweeting one chart a day on Twitter.  This is something new for us.  So every day or so, we’re going to tweet one of the new charts from our online materials.  You can take a look and follow me under my own name on Twitter, and I look forward to talking to you all again soon.

FEMALE VOICE:  Michael Cembalest Eye on the Market offers a unique perspective on the economy, current events, markets, and investment portfolios and is a production of JPMorgan Asset and Wealth Management.  Michael Cembalest is the Chairman of Market and Investment Strategy for JPMorgan Asset Management and is one of our most renowned and provocative speakers.  For more information, please subscribe to the Eye on the Market by contacting your JPMorgan representative.  If you’d like to hear more, please explore episodes on iTunes or on our website.  This podcast is intended for informational purposes only and is a communication on behalf of JPMorgan Institutional Investments, Inc.  Views may not be suitable for all investors and are not intended as personal investment advice or a solicitation or recommendation.  Outlooks and past performance or never guarantees of future results.  This is not investment research.  Please read other important information which can be found at www.JPMorgan.com/disclaimer-EOTM.