It was just a few months ago when reports of rising coronavirus cases routinely sent stocks into a tailspin. Not anymore.
Rather, it’s as if investors have become inured to daily COVID-19 count headlines. Take Monday, when the cumulative number of total confirmed cases in the U.S. neared 3 million, yet the S&P 500 rose for a fifth straight day, its longest winning streak of the year. Tuesday, the president of Brazil tested positive for the virus, and stocks barely budged.
As difficult as it may be to understand, especially with human lives behind each and every statistic and businesses still struggling, some Wall Street strategists say there are logical reasons for the disregard. Instead of rising case counts, traders moonlighting as epidemiologists are now focused on data including fatality rates and hospitalizations that could force governments to lock down anew or pressure the economic recovery.
“Case count isn’t necessarily a negative as long as those who are catching it aren’t susceptible to a really bad outcome,” said Bob Phillips, managing principal at Spectrum Management Group. “As long as the trend of deaths stays down, I think investors can live with the virus and with the expectation that we will get through it and we may have seen the worst of the damage.”Following are three views on why rising COVID-19 case counts haven’t toppled the stock market.
1. Positivity Rates
According to Bespoke Investment Group’s Paul Hickey, virus positivity rates may be skewing higher due to a lack of testing over the holiday weekend. Consider that reported coronavirus tests are down 9% on a week-over-week basis, the biggest drop since a 24% decline that happened around Memorial Day. It’s likely the Fourth of July holiday is at least partially to blame for higher national positivity rates.