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By Andrew Busch
Key Takeaway: There is no returning to a pre-pandemic economic “normal,” but we’re dealing with it. We have seen the best our technology can produce when Moderna and Pfizer announced their vaccines at the end of December. The speed and efficacy are breathtaking and miraculous. As of February, the U.S. had given out over 57 million doses. At this rate, the Biden administration is easily meeting their goal of 100 million doses in 100 days as the nation is immunizing 1.69 million per day according to Bloomberg’s Covid-19 Vaccine Tracker. Yet even at this elevated rate, it’s estimated it would take 9 months to cover 75% of the population. The goal is to create herd immunity where there is a significant decline in the number of new infections as the pool of available hosts declines from the immunizations. We have already seen a dramatic decline in the number of hospitalizations from the virus. And the number of infections. All indicate an ebbing of the virus’ impact on the population and potentially on the economy. Fantastic. There is guarded optimism the U.S. will continue to see significant improvements as the production and distribution of the vaccines ramps up even further with output doubling in the coming weeks according to Bloomberg. Some researchers, like Dr. Marty Makary, think we could achieve herd immunity in April. Sadly, I gotta be the guy leaving the party telling the hosts, “Had a great time, but someone dumped a bottle of red wine on the white carpet, somebody threw up on the floor in the bathroom and your dog is loose.” For the red wine, the virus has mutated with strains from the UK (B.1.1.7), South Africa (B.1.351) and Brazil (P.1) all showing signs of higher infectious rates and mortality. (Read CDC descriptions here.) This is to be expected as it mimics previous virus patterns similar to the Spanish Flu in 1918-1919. Vaccine-makers are developing booster shots to help those who have already got the jabs. And other producers are developing vaccines intended to work on the new strains. The best news is that none of the tweaked vaccines are required to go through a large scale clinical trial to prove the jabs work. The second area is one we’ve covered in a previous article on the Top 5 Economic Risks for 2021. And it was the #1 risk on the list: vaccine hesitancy. If a large enough part of the population is not vaccinated, then it will be next to impossible to create herd immunity. CDC’s Dr. Fauci recently stated the U.S. will need 75-80% of the population vaccinated to achieve this goal. “We need to have some humility here,” he added. “We really don’t know what the real number is. I think the real range is somewhere between 70 to 90 percent. But I’m not going to say 90 percent.” (NYT) Polling has recently indicated more Americans today want to take the shots than in 2020. When I do virtual events for clients, I always ask the question of when people would get the shot to better understand the mindset of the audience. In May, the rate wanting to get the shot was below 50%. Over the last 2 weeks over 4 different events, the rate was above 70%. This is encouraging. Lastly, the administration of the vaccinations has been uneven in the United States according to Becker’s Hospital Review. New Mexico, North Dakota and West Virginia have done a great job on the roll-out and administered close to 90% of the distributed vaccines. Other states, like Illinois, struggle to get over 75% with Alabama the lowest at 63%. And these percentages are from the number of doses distributed to the state, not the total population needing to be jabbed to achieve herd immunity. (Think Venn diagram) Given these 3 factors, I believe we are now in the process of moving from a pandemic into a situation where the virus is endemic. In other words, we are never returning to “normal.” My guess is the virus will likely be with us beyond 2024 and likely longer. And maybe forever like the flu. Don’t get me wrong, I’m still an apocaloptimist and think the U.S. will continue to adapt and grow. How can you not be an optimist for the future when Moderna can create a vaccine over a weekend after getting the genetic code? For the economy, the trends supercharged by the virus will remain as will the virus. Let that thought settle in a moment. Think what it means for leisure & hospitality, concerts, entertainment and travel/transportation. While these sectors are adapting and bouncing back, they are still significantly below where they were at the start of 2020. If my analysis is correct, these businesses will never be the same as consumers and businesses have adjusted their behaviors. They can survive and grow, but not at the levels they achieved prior to the outbreak for a longer than expected time. In their latest “The future of work after Covid,” McKinsey states, “The pandemic accelerated existing trends in remote work, e-commerce, and automation, with up to 25% more workers than previously estimated potentially needing to switch occupations.” Hey, I wish I was just arriving at the party, instead of leaving after things got out of hand. But sometimes you have to tell the hosts what they should know before they find out for themselves. Planning your virtual event? Get in touch with us at the Capitol City Speakers Bureau today to book your healthcare speaker!
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By Andrew Busch
Why Elon Musk is Like a Greek God Let’s state this right at the start: the goal of the Biden administration, Congress and the Fed is to make the economy white hot. Not trend growth, not strong growth, but 8-10% GDP growth. Let that sink in for a minute. The U.S. economy will recoup the lost economic growth from 2020 in 2021. Remember in June of last year, the Congressional Budget Office estimated it would take 10 years to recoup this lost economic output or output gap. They are everything we’ve come to expect from a government economic research group. The truly shocking development has been the rapid wall of money created by the White House, Congress and the Federal Reserve. This is unusual and extraordinary. Due to the massive amount of stimulus from CARES 1.0, 2.0 and 3.0, we now have over $10 trillion dollars working its way through our economy. This is on top of the monetary stimulus the Federal Reserve continues to pump through the veins of the U.S. economy. The Fed’s stimulus included $3+ trillion of new assets and cutting short-term rates to zero with a pledge to not raise the rates in our lifetimes. OK, that last of that is not true. But the comments recently feel that way as Fed officials go out of their way to reassure markets they will not react to a short-term increase in inflation. The U.S. economy has roared back and as stated above, the markets/analysts/economists are expecting a complete GDP recovery by the end of this year. This is not the complete story. There are still 10 million workers who have lost their jobs due to the pandemic. This is the focus of our government right now and the driving reason for the push to enact a $1.9 trillion stimulus package. While ex-President Trump is being tried in the Senate this week, it’s fair to say that Democrats are emulating him on the economy. It was under Trump and a unified Republican Congress that the TCJA (Tax Cuts and Jobs Act) was enacted, leading to above trend economic growth and drawing in workers to drive down the unemployment rate to historical lows for blacks and minorities. Paraphrasing the Raiders’ Al Davis deficits be damned, just stimulate, baby. This gets us to where we are today: the $1.9 trillion stimulus package. This is raising economists 2021 Q2 GDP forecasts from 4% to as high at 10%. The Fed is onboard and will continue to buy as much debt as necessary to not only stimulate the economy, but also to ensure the bond market doesn’t become overly volatile. The Fed is not concerned about inflation. The Jay Powell Fed believes it has learned it can run the unemployment rate down to 3.5% without creating wage inflation. All the major government economic decision makers are aligned to create policy to drive down unemployment. For the markets, it translates into the biggest risk-on party in our lifetimes. Go ahead, try to think of another time where monetary and fiscal stimulus were in completely and utterly aligned for generating rapid, over-the-top growth? Tesla and BTC percentage returns over 5 years Can you think of another time where a car company (Tesla), who’s stock price is running at 100x EPS, decides to use almost a full year’s revenue to make a bet on 1 financial product? Or when retail investors have dramatically dominated trading volumes as these rose from 10% of trading in 2019 to 25% today? Keep in mind, the party won’t stop after CARES 4.0 gets passed. President Biden and fellow Democrats have another budget for 2022 they can utilise under reconciliation (50 votes only needed in the Senate) to bring about more stimulus. Infrastructure, housing and expansion of Obamacare are on the spending to-do list. What does this hold for the future economy? Rapidly rising risky asset prices, rapidly rising housing prices, and rapidly rising deficits. A more volatile bond market despite efforts from the Fed to contain the price movements. Guess what happens if the Biden administration is successful with the vaccine program? Economy, steroids, on. And Musk? Musk is simply the Hermes for the Stimulus Gods. Planning your virtual event? Get in touch with us at the Capitol City Speakers Bureau today to book your healthcare speaker! |
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