The daily number of confirmed COVID-19 cases in the United States has increased to more than 150,000, almost five times the April peak and more than double the summer peak. The reproductive rate, a key measure of how fast the virus is growing, is above 1.0 for almost every state in the country,1 indicating a quickening spread. COVID related hospitalizations continues to set new highs, daily deaths are back near summer highs (less than half of April peaks) and leading experts warn that the situation will likely get worse before it gets better. Only seven states, however, are estimated to have reached ICU capacity of more than 70%; only Georgia is at slightly more than 80%.2
More importantly for markets, extremely encouraging vaccine development news continues to emerge. On Monday, Moderna announced that interim results of its phase 3 COVID-19 vaccine trial had a 94.5% success rate, which was even better than Pfizer’s outstanding 90% success rate. What’s more, Moderna’s vaccine is much easier to transport and store. Although the broad market indexes’ responses were relatively muted, the rotation trade into cyclicals continued, suggesting that the world ahead looks good enough to let economically sensitive sectors further close the performance gap with defensive, growthier companies (Figure 1).
In other news, more mixed data came from the economic front. U.S. retail sales edged up 0.3% in October, slightly behind expectations, while industrial production and capacity utilization both came in higher than consensus estimates.
Source: Morningstar, as of 11/16/20; sector returns are based on SSGA Sector SPDR ETFs.
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