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Rising Concerns

"Fight for things you care about, but do it in a way that will lead others to join you.” – Ruth Bader Ginsburg

On a weekly basis we have been updating our chart plotting the growth rate in Covid-19 against the price of the S&P 500.  We are bringing our updates to a close because (at least for now), we have determined that the correlation between the market and Covid-19 daily growth rate in cases has broken down.  Over these last weeks the market has remained largely flat while virus data has raised concerns.  After setting its 52-week low March 23rd the S&P 500 has risen over 40% from its bottom and is now down roughly (1.5%) on the year.  

The chart below illustrates the price movement in the S&P 500 against the growth rate in the CDC’s reported number of Covid-19 cases.   Indicated by the chart’s red line, the daily national growth rate in Covid-19 has risen these last few weeks.   Growing at a daily average rate of 2.5% over the last week, while the number of people tested continues to trend higher with a daily average of 645,097 for the period June 29th – July 3rd.  The Atlantic has organized the Covid Tracking Project which charts Covid-19 tests nationally https://covidtracking.com/data/us-daily.   

Source: FactSet financial data and analytics

Against this backdrop the S&P 500 remains in a confirmed uptrend despite the sideways movement over the last several weeks.   While more progress needs to be made battling the virus, such as greater acceptance of wearing masks and social distancing, growth in confirmed cases peaked at over 200% when the market set its 52-week low, March 23rd.

Nationally, testing has made great strides in numbers and availability.  In addition, Covid-19 mortality rates have improved significantly.  Digging deeper there is concern that some states have opened too fast, too soon.  Evaluating some states such as Arizona and Texas, where growth in the virus has increased and hospitalizations are rising.  Trends in California are also concerning because the state had imposed a strict lock down, started reopening but has reversed course, imposing restrictions again.

It’s our humble opinion the market rally stemmed from the declining growth in Covid-19 cases along with the extraordinary measures taken by the Federal Reserve Bank which until recently had been driving the market higher these past months.  We understand the concern that there is a Covid-19 resurgence in places that reopened more quickly than others.  We will continue to pay attention to the available data from the CDC and The Atlantic’s Covid Tracking Project.  Should the market restart its trend higher or unfortunately reverse, we will analyze the available date to evaluate the relationship between accessible Covid-19 data and market direction.



Kevin T. Curran, CFA
 President & Chief Investment Officer

Curran Investment Management® is Defining Quality®

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