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The Implications of a Second Wave for US Stock Investors

It’s increasingly looking like “wave 2” of Covid-19 in the US peaked at some point in early July and is now on the down-slope.  The first US Covid wave — centred around the northeast corridor and the midwest — took 4-6 weeks from start to peak and then another two months to make its way down the backside of the mountain. 

The second US Covid wave — centred around the south and southeast — began in early June, and it’s looking like it peaked in early July over a roughly 5-6 week period.  We would now expect a gradual slowing of cases in the current hotspots similar to what we saw in the northeast during the first wave. 

We have been having some fun monitoring Google search terms to see what people in lockdown are searching for. It is amazing the insights this can give you into consumer behaviour and sentiment.

Here is the Google trend Data for the term “covid symptoms” over the last 12 months. You will notice the peaks coincide almost perfectly with the number of infections and you can clearly see the two waves

A look at US search terms for “covid symptoms” over just the last 90 days shows a peak in early July and a gradual trend lower beginning

It certainly looks like interest in “covid symptoms” has turned a corner and this is being confirmed by the number of new cases which is dropping each day.

We can use this data on the second wave by looking at what performed best after the first wave. Once the number of cases started dropping after wave one, investors got excited about businesses re-opening and it was those stocks that performed best.

We deemed this re-open story as Act 2 of the bull market. Act 1 was stocks set to benefit from lockdown which we highlighted in our Pandemic Portfolio (you can read about that by clicking on the gold words right there)

But when Wave 2 hit those “re-open stocks” fell away again as it became apparent the re-open story wasn’t happening.

However, we are back in that zone now again and possibly even more so as there is increasing pressure to get people back to business and not incur any more government debt. This second bite at the re-open story could be even more profitable than the first one.

If you want to know which stocks we like best for the re-open story, call us in the office and we will be happy to talk to you about them

PS. Remember this is not the end of the world and deep dark days of depression and bread lines. The market looks forward and so has already factored in large unemployment and reduced business income. We have a health problem so the volatility will not go away until we have a health solution. But the whole world is working on a solution and every day that passes is another day closer to that solution. There is still an opportunity to make some good investments but that opportunity is closing by the day. Do not delay here as if you wait for the cure, you could well end up buying at the top.

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