We write you on the eve of a Thanksgiving that will be a different one from usual for countless of us. As you know well, we all have been set upon by a global pandemic for almost the entire year. Covid-19 has upended lives and livelihoods, strained health care systems, and profoundly altered how we go to work, go to school, socialize, and recreate. Tragically, it has taken far too many friends and family away from us. And leading up to what is normally a magnificent holiday, largely unspoiled by excesses outside of food and beverage, we have had to make decisions among ourselves and our cherished ones about the extent to which we will get together around the table to celebrate the bounty of the season.
In raw numbers, Covid-19 is burning through the US population at present, in all regions of the country. We are at new highs daily in case counts, roughly 175,000 new cases daily and accelerating, and well above the prior peak we saw in the summer. There are 88,000 of us presently hospitalized, fighting the disease. Nearly 270,000 citizens have succumbed so far. Increasingly, rural parts of the country are experiencing a surge in cases, presenting dire challenges for comparatively under-equipped health systems in sparsely-populated areas.
Sadly, there is a lagged effect to all these Covid statistics. The virus will continue to spread through our communities, and it is a certainty that the numbers will get worse before they get better. And it is almost a near-certainty that Thanksgiving-related travel, even if reduced in scope, will prove to be a new vector for the spread of the virus.
Despite these sobering numbers, there are reasons for hope, and optimism. We have made steady progress in understanding the disease, although we have much more to learn. Far more people are surviving a bout with Covid, due to earlier detection and improved treatment protocols. New medicines are being used in treatment, including the anti-viral remdisivir, as well as some very promising monoclonal antibody medications, although these remain in short supply at present. We have known for some time that Covid preys on the older and sicker among us, and for those vulnerable people especially, good hand hygiene and social distancing are essential defenses, as is proper mask use when we cannot remain physically distant, or are in enclosed spaces.
Some of the best news has come from the several companies racing to produce Covid vaccines that can prevent the disease. In recent days, three major studies have yielded highly encouraging data on the effectiveness and relative safety of vaccines in development, and additional vaccine study results from other projects are also in the near offing. Optimism is high, and likely not misplaced, for several vaccines to receive approval and be placed in mass production, with onset beginning in early 2021 and ramping from there. Of course, there are the remaining hurdles of mass production and distribution, and the ethical priority of vaccine delivery to population subgroups, but make no mistake, these are highly significant developments in the war on the pandemic, and they offer some of the first tantalizing hints that we might return to a normal-seeming existence as next year unfolds.
This news was certainly not lost on the stock market, either. Stocks surged higher on November 9th on the first vaccine news from Pfizer, and surged a second time, a week later, on similar news from drug maker Moderna. Encouragingly, some of the hardest-hit sectors tied to travel and leisure rallied sharply, as did financial stocks, retailers, and other economically-sensitive companies, while growth stocks took a relative pause. The market’s rally broadened to mid-sized and smaller companies, as well, another indication of investor optimism that we’ll move past the pandemic.
Another significant event in our midst was the Presidential election. Trepidation among investors was high as to its outcome, and uncertainty over the winner persisted over several days as the votes were tallied and the vote counting process argued over and challenged in court. The historic level of mail-in voting in this cycle, hastened along by the pandemic, has been no small source of controversy, but vote counts have been certified by the states, Joe Biden is the President-Elect, and the presidential transition process is formally underway.
The election’s outcome, following a few tense days of uncertainty, has been an additional tailwind for investments. We don’t yet know whether the Biden administration will also have a Senate majority; Georgians will go to the polls on January 5th to elect both their Senators, and control over that chamber lies in the balance. The early indications are that the Biden administration is putting forth well-qualified persons as it builds out the Cabinet and internal positions. We view the developments to date as investor-friendly, although there are numerous contingencies to consider as the new Administration grapples with control of Congress, policy priorities, as well as the economy, as it continues its uneven recovery from the pandemic.
We continue to monitor our investment strategies on your behalf. We have been disciplined in trimming profits from a number of investment positions that were noteworthy beneficiaries of “stay at home / work from home” themes earlier in the year, and we are selectively adding capital to economically sensitive positions. The fixed income arena remains beset with very low rates, which we expect to continue. With interest rates low and inflation still quiescent, we still believe a case can be made for owning equities, even at higher valuations than typical. We expect to see positive signs for economic recovery next year that will confirm the present move higher in stocks.
In closing, 2020 has been a year to remember, and it’s not done yet. In the short term, sadly, the pandemic news will not be favorable. But a turn is near for our lives and it comes none too soon. Please accept our best wishes for Thanksgiving, however you choose to spend it, and our wishes for good health while we await the arrival of vaccines protect us from the scourge of Covid-19.