Market (Quietly) Pivots Back To Lockdown Trades, As Kudlow Says ‘No Second Wave Coming’

“There is no second wave coming. It’s just hot spots”, Larry Kudlow told CNBC Monday, parroting the party line, even as virus cases rise across the country.

“They send in CDC teams, we’ve got the testing procedures, we’ve got the diagnostics, we’ve got the PPE”, Kudlow continued. “And so I really think it’s a pretty good situation”.

It’s really not — a “good situation”, that is. There’s nothing “good” about an epidemic that’s killed 120,000 Americans in the space of three(ish) months, and Kudlow’s feckless remarks just underscore the extent to which Trump no longer cares. If we’re all being honest, the White House has thrown in the towel on containment.


Those charts are simple and they speak for themselves. This isn’t “contained”.

And maybe it doesn’t need to be. Maybe if we protect the most vulnerable members of society and ensure the healthcare system doesn’t become overrun, we can simply go on about our business (figuratively and literally in the case of reopening the economy) until effective therapeutics are available and/or until there’s a vaccine.

But if that’s the approach, the administration might as well just say so. Leaving the market to interpret and otherwise surmise the official position by subjecting everyone to day after day of disingenuous soundbites serves no purpose.

Meanwhile, the “stay-at-home” trade is back as Netflix, Peloton, and Zoom hit record highs Monday. Investors are keen to stay in the market, but they’re simultaneously recognizing the possibility that even if a return to across-the-board lockdowns isn’t in the cards, stocks that benefit from shut-ins are still a good bet.

High beta shares, meanwhile, are tracking for a third straight week of losses, on the heels of dramatic gains during what is again looking like a head fake when it comes to the pro-cyclical trade.

A similar dynamic is observable in the usual places. The rotation has stalled. “Nascent” and “burgeoning” were once again the correct adjectives (see “The Only Debate That Matters“).

The flip side of that visual is predictable. The Dow Jones US Thematic Market Neutral Momentum gauge is up four consecutive sessions.

So, even as investors aren’t keen to fade the broad market gains, they are showing signs of fading the reopening trade. That, even as the reopening itself proceeds apace.

“Does it matter that the troublesome US states are continuing to see case numbers increase or does it provide some good news that economies can stay open as cases rumble on?”, Deutsche Bank wondered on Monday. “It’s possible that with more knowledge on the virus, the vulnerable are now being better protected which will dramatically reduce the fatalities if successful”.

That is, in fact, possible. Likely, even. And it seems to be what the president is betting on. Either that, or he’s grasping at straws.

“Trump held a rally in a half-empty stadium over the weekend in which, as expected, he pledged to be the face of Law & Order. He’d already tweeted ‘LAW & ORDER!’ previously – to which someone replied ‘MORK & MINDY!’…which sums everything up”, Rabobank’s Michael Every wrote Monday, in a truly amusing note.

He added the following: “Indeed, the half-empty stadium might reflect flagging Trump voters and an imminent defeat of America First US economic populism”.

Don’t tell that to Larry Kudlow. In the same interview with CNBC, he outlined some of the president’s exciting new initiatives including (and this is a quote) “entertainment, athletic contests [and] things of that sort”.


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8 thoughts on “Market (Quietly) Pivots Back To Lockdown Trades, As Kudlow Says ‘No Second Wave Coming’

  1. The chart of Covid cases in Europe as a whole (and not just the US/Italy chart) is looking pretty good for Europe. (As do the charts for S. Korea, Taiwan, well, you get the picture.) The continued health impacts of the virus in the US is a self-inflicted wound. Other countries figured it out. We couldn’t. Boost liquidity. Bid up SPY/QQQ/DIA/RUT.

    The narratives on what the stock market is going to do day to day, and why it did something today, or is going to do something this afternoon, are sad. All the opinions, the reasons, the interpretations, rotations, rotations that stopped, bad data is good data, bad data is better than bad data. It’s all a waste of digital ink. Reading entrails is next.

  2. In the current climate it is impossible for anyone to make the utilitarian argument to prioritize the economy over human life even when it can be shown that in the long run GDP outcomes impact on outcomes, death, health, welfare, food insecurity would seem to be an issue that gets drowned out if you can paint a politician as being insensitive. There is no judgment here, just making an observation that everything is getting viewed through a political lens.

  3. Last year, the flu vaccine was only about 45% effective – which was more effective than the flu vaccine was for 2018/19. Waiting for a perfect vaccine is going to be a long, long wait.
    As difficult as it is to “reopen”, I think we have no choice. The people of the US, businesses and the government have a shared responsibility to navigate this crisis to the best possible outcome- which is balancing saving lives with moving forward with life ( this is not just about GDP). The best path forward is probably not at either end of that spectrum.
    The best way to achieve this is through making both testing and factual information about the virus readily available. There is a basic human instinct to survive, which will influence government, business, and individuals decisions regarding the best path forward.

    1. Without facts, intelligent and honest decision makers the best way forward can’t be found. Our system of government is structured for continued rolling failure. We’ve become a 3 wheeled cart trying to cross the Sierras through the Donner pass before the winter comes with plan B being cannabalism.

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