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Will Reopening Cause a Second Wave of Infections?

One of the big concerns about reopening is we are going to have a ‘second wave’ of coronavirus cases. It seems fairly obviously that cases would go up, especially if we don’t have the proper amount of testing.

The good (?) news is that 4 states are started or will start to reopen soon:

  • Florida has reopened some of its beaches
  • Georgia plans on just about a full reopening by the end of next week
  • South Carolina is opening many stores and beaches
  • Tennessee will open most counties Monday

One issue is these states still have a pretty high case load even as of yesterday:

We can use these states to track what the case load does after the reopening begins. Additionally, we will be able to see how much of the economy improves on reopening, especially in Georgia. They will open restaurants on April 27th.

It’s also worth noting that Atlanta’s airport is the busiest in the world.

By Christopher Schwarz, ago

Stocks Are Not Cheap Here

Back in March, I posted that I think you’d be better off buying Verizon, Colgate, etc. than buying 10-year bonds at 0.6%. That was fairly close to the market lows.

However, the market has rebounded the last few weeks and now seems fairly ahead of itself. Here is a graph of the forward P/E (Price to Earnings ratio). I have a few entries for 2020.

Forward P/E Ratio over time

You can see that back in March, stocks were very cheap based on earnings expectations at the time. However, stocks are up about 30% off their lows and earnings expectations have declined considerable and so now stocks are at their highest forward P/E since the tech bubble.

And I think these expectations are still way too high. Look at the expectations for the change in earnings across quarters.

Data from Factset Insight

Analysts are expecting almost a full recovery in earnings by Q4. I’ll take the under on that.

By Christopher Schwarz, ago