Is the COVID Narrative colliding with Reality?

We’ve been told that Covid will be under control in the Spring.   Now I’m hearing late summer or fall or ”before the end of the year”.
The Market promoting Wall Street Banks and Financial media have been promoting that the end of Covid will unleash binge spending and company earnings will explode. 

For a while I’ve been noting that the production/delivery timeline of vaccine doses doesn’t align with anywhere near a majority of the population being vaccinated by spring or early summer.  Production capacity is limited so deliveries are limited. 

 
Now I’m hearing government spokespeople saying we will be in the clear in the fall or ”before the end of the year”.

But I am not hearing Wall Street adjust their rosy view of company results.   And, the market just keeps chugging higher.

In the last week the narrative around the duration of the Covid epidemic has changed.   The ongoing story was that by Spring a meaningful portion of the population will be  vaccinated and by early-mid summer we would be getting “back to normal” in terms of the economy and our social, work, vacationing and shopping lives. 

This week we are hearing our President say that we will be out of the woods by the end of the year, and the medical experts clearly saying that we will be constrained in vaccine availability through March and longer, and they are talking about getting kids fully back to school in the Fall.    Thus, the expected “return to normal” is being pushed back by 3-6 months. 

The vaccine has been positioned as the solution to the pandemic.  Get everyone vaccinated and then we go on with life.    This narrative is changing as well because of the variants of the virus evolving around the globe.   Now we are hearing about the probable need for booster shots or some sort of annual shots like we have for “regular” flus.  So, normal is not the old normal.  

And, speaking of around the globe, we are now being reminded that while the richer nations with the money and assertiveness to contract for large quantities of the vaccines will be getting a reasonable percentage of their populations vaccinated this year, for a large portion of the global population, vaccination will take longer.  Therefore, international travel will still be complicated for some time. 

What I am NOT hearing is anything from the financial or business community about how this impacts expectations for WHEN the “opening up” of social, travel and entertainment will start.  If not April, then when?  And, HOW will this impact corporate balance sheets and earnings?  And, if Covid isn’t going away at all but will be “controlled”, then how will this impact what people do with their money and how they choose to interact with others?   How will this impact the promoted massive travel surge or wild spending that is the basis for the big pop in projected corporate earnings?   The consensus predictions for S&P 500 earnings show a jump from last year of 25% and a jump from 2019 pre-pandemic of 10% even as it looks like half the year may look like the last half of last year. 

I’d love to see the big opening-up, people getting together and traveling, too.  But, if more than half of the current year may look like last year instead of maybe just one quarter being slow, aren’t these projections of companies making money hand over fist a bit rosy?  And, if they are rosy, might the high multiple on the stock market, which has been justified by future earnings, also a bit rosy?   

I know this view is so old-school – earnings, valuations, math and ratios.   We don’t need to deal with that anymore.  Now just buy SPACs and look for shorted stocks to load-up on with your crypto-currency.  With the long hind-sight of the last six months we now know that the market only goes up . . . . .

While we don’t want to minimize the situation, we believe the virus will be contained and solutions found. In the long run, we expect the markets to recover from the current panic.

Our prayers are with those who have lost loved ones during this crisis, and those faced with the uncertainty brought on by its impact. We believe that faith that is tested brings all of us closer together and closer to our God.

We are here if you have any questions or concerns.

Ed & Claudia