Here And Now

Here And Now

Stop me if you’ve heard this one before: US equities were torn between encouraging vaccine news and fresh lockdowns, as the “here and now” realities of a public health crisis played tug of war with expectations of a brighter future.

That’s been the script for markets nearly every session for weeks and Wednesday was no different. Pfizer said its vaccine was 95% effective based on a final analysis of clinical trial data, but the good vibes didn’t last.

New York City schools will stop in-person learning after the city’s seven-day average positivity rate breached the key 3% threshold, prompting Mayor de Blasio to close classrooms “out of an abundance of caution.” This was not a surprise. Indeed, it was all but a foregone conclusion. Still, it leaves many parents in a bind. Hundreds of thousands of students who were receiving some form of in-person instruction are affected.

Andrew Cuomo could intervene to keep schools open, but said he wouldn’t. Last week, Cuomo cited low transmission rates in schools in noting that “you could argue that keeping the children in the school is part of the solution, rather than the children spending time on the street in the neighborhood where the infection rate is higher.”

Still, the threshold was agreed months ago, and for now, the rule holds. Officials contend there simply isn’t enough information to change it. Cuomo indicated that the same threshold — a 3% average positivity rate — would also trigger the closure of indoor dining, gyms, and non-essential businesses deemed “high risk.” He predicted what he characterized as a “tremendous” surge in cases after Thanksgiving.

The writing, as they say, is on the wall. As it is for the MTA, which is poised to cut service by as much as 50% pending billions in financial assistance from Congress. This marks the realization of a nightmare scenario that will entail higher fares and put more than 9,000 jobs at risk. “This was undoubtedly one of the most difficult budgets the MTA has ever had to develop in one of the most unusual and uncertain times,” MTA CEO Pat Foye remarked, describing what’s been billed as the “doomsday” budget. The MTA says it needs $12 billion in federal aid.

“The election of the President-elect is a very positive step,” Foye added. “Every school child knows he’s called ‘Amtrak Joe’… and throughout his entire career has been an ardent supporter of mass transit and public transit. That’s a positive.”

But outside of Biden (and COVID tests), there aren’t many “positives.” Just ask Betsy Plum, executive director of The Riders Alliance. “Firing 9,000 workers and slashing 40% of subway and bus service would cost millions of New Yorkers several hours of commuting time each week and devastate the city for decades to come,” she warned. “Like never before, New Yorkers are counting on our Congressional champions like Senator [Chuck] Schumer and Representative Jeffries to save public transit.”

And that gets right to the heart of the issue. Schumer’s hands are tied. Mitch McConnell reiterated again on Wednesday (this is a daily thing) that Democrats’ $2.2 trillion virus relief bill “had no chance of becoming law.” He then cynically claimed he’s “hopeful” for a stimulus deal. Schumer called McConnell’s aid plans “inadequate” while Nancy Pelosi said she has not heard back from McConnell on virus relief.

It is, in a word, disgraceful and, frankly, borders on inexplicable.

Needless to say, stocks weren’t particularly amused with any of the above and it feels almost trivial to mention equities. The S&P closed on the lows following the announcement from de Blasio. It was the second consecutive day of losses.

Unfortunately, Treasurys were no help. A lackluster 20-year auction weighed, and yields were basically flat. Bonds were not your hedge. And neither was gold, which fell.

At least Bitcoin is back in mania mode.

“The touchstones for sectors viewed as disproportionally benefiting from the Moderna/Pfizer follow intuitively — travel, hospitality, restaurants, etc. — what remains to be seen is how quickly the potential upside translates into realized gains,” BMO’s US rates team said Wednesday afternoon. “The prospects for 2021 to end closer to normal may have improved, but there remains a great deal of economic heavy lifting yet to be accomplished.”

Indeed. And Congress doesn’t seem particularly keen on helping out — or at least not on one side of the aisle, anyway.

Georgia matters, folks.


6 thoughts on “Here And Now

  1. NYC is an alpha++ city and arguably the world’s financial capital. The city is a treasure, a reflection of American success, and American dominance in all matters financial and political, for many, many decades now. And yet, our nation, the richest, most successful beacon of wealth and democracy the world has ever known, can’t seem to find it in our soul to keep the trains running.

    How we have managed our decline, nay, not even recognizing from within that it is even occurring, will not be judged kindly by future storytellers. The historians will start their chapter on our collapse from hegemony with a parable taken from a Disney children’s story book.

    1. The real estate lobby is largely to blame for NY’s many intractable, perhaps unsolvable, financial and inequality problems. I for one look forward to the day soon, perhaps next year or so, when Vornado and SL Green, or much of their portfolios, go bust, probably not without first shamelessly begging Congress and the FED to save them. How is it, one might ask, that arguably the richest, most powerful city in the world, built on arguably the most valuable real estate in the world has a dysfunctional public transit system seemingly always on the verge of bankruptcy? The arrow points exactly in this direction. The other points directly at Cuomo, who has used his control of it as political leverage over the city for a long time.

  2. Maybe by the time the next pandemic hits, nations will have a financial ‘force majeure’ plan in place to freeze debt obligations, give out government backed food coupons to all in need that can be used in grocery stores, and to prevent idiot politicians from allowing a rerun of the ‘Trump’ virus scenario. There will be another one.

  3. Just tactically, follow the Euro curves that shot up, peaked as countries re-locked down, and are declining. I think US curves will do the same – even the Trumpiest of governors flinches when their hospitals are full. It is going to be a bad couple of months for people, but I think investors have learned to apply “second derivative” trading rules to the new case curve.

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