With Labor Day behind us and the season changing, we in the northeast would normally be turning our attention toward the pleasures of autumn. The profoundness of our American history seems surface in the fall in the northeast. The fall foliage in October, along with crisper temperatures and the prelude to the holidays is always a special time.
But this year has been like no other and, at Atlas, we’re preparing for what will no doubt be an interesting few months of political, economic and social give-and-take. We think that the next several months will bring historic happenings on several fronts. We’ll touch on only a few here.
Reopening of Schools
As was mentioned in an earlier email this summer, we at Atlas, along with the rest of the country, are dealing with the process of schools reopening. Many Atlas associates have school-aged children, and several have spouses that are teachers or otherwise employed in the education industry. So, we’re becoming acutely aware of the issues around partial school openings, daycare availability, and having kids staying in the home during school time. To be sure, these issues are putting stress on families, school districts, and businesses.
It seems that many people may not be not fully aware of the impact that schooling has on the economy. Not only does the education industry provide an enormous amount of jobs in the U.S., according to a St. Louis Fed estimate total activity in the education industry contributed approximately 6.2% to total U.S. economic output in 2018. So, delays in opening, partial schedules, and/or outright shutdowns of schools have the potential to meaningfully impact the economy.
While we would never advocate for a reckless reopening of schools for economic reasons, it is worthwhile to understand, as an investor, what the impact of interruptions to this industry might mean for the economy. Certainly, we have all become aware of the fact that technology is making an enormous impact on the ability to stay productive in jobs while working from home. Likewise, it can help kids to stay engaged in their education in many cases. However, as we get further into the school year, we’re concerned about the impact on the economy that interruptions to the normal school calendar may have on the economy.
With the reopening of schools, and the further reopening of the economy, comes the prospect of a “second wave” of Coronavirus cases. At the time of this writing, deaths in the U.S. stand at over 201,000, and new weekly cases stand at just under 300,000. Whether those numbers are accurate or overstated isn’t the issue. The direction is. The good news is that the 7-day moving average of new cases is currently down from the July highs. But, more recent data shows that September may mark a reversal of that downward trend.
At the moment, Europe seems to be vulnerable to a possible second wave of the virus. Spain, France, and several other countries are seeing surges of new cases and are taking actions to curb a second wave. Interestingly however, there is a divergence between infections and hospitalization rates. Hospitalizations have not yet seen a similar rise (we would point out that the rate of hospitalizations is a lagging indicator and the rate could change as we go forward). This change could reflect the theory that the virus’s potency is diminishing or the fact that it is now infecting younger people, reported to be less susceptible to the worst symptoms. Perhaps these trends mitigate the need for another shutdown in the midst of another wave. However, to rely on that and become lulled into complacency as we approach winter here in the U.S., wouldn’t seem prudent.
When will we have a vaccine? This cannot be properly answered with a simple projected date. We will have a vaccine when “a candidate vaccine is demonstrated to be safe, effective, and available. That can be determined only by scientific data.”  At the moment, Pfizer, Moderna, AstraZeneca (trial on hold in the U.S.), and Johnson & Johnson are currently in Phase 3 trials. Several other companies are in Phase 2 trials. But this isn’t a winner-take-all contest. Producing and distributing the vaccine for all that need it is a monumental issue, perhaps much more of a challenge than can be addressed by a single supplier. In addition, it is being reported that some of the compounds that are currently behind in terms of testing may have better safety and efficacy profiles. So, “when will we see a vaccine?” might be better asked “when will we see a set of vaccines that are safe, effective, and widely available?”
We think the question on most folk’s minds is “when can we begin a return to normal life?” For us, that question gets more to the heart of the matter as it relates to the economy, jobs, and corporate profitability. Perhaps we’re looking at some time in 2021. Hopefully not much longer.
Perhaps the most frequent question we’re being asked these days relates to how the various outcomes of both the presidential and congressional elections could play out for markets. To be sure, this election is perhaps one of the most hotly contested and politically divisive contests in our lifetimes. From a policy standpoint, it appears the two sides could hardly be further apart. From a political and social perspective, it seems the country appears dreadfully split.
That said, we’ll offer a few very basic thoughts on the possible outcomes. To the extent that we see a resumption of the status-quo in Washington (i.e. President Trump is re-elected, and the Senate and House remain controlled by the Republicans and Democrats respectively), we would expect markets to react favorably. Based on what we know now, and purely from a financial perspective, a resumption of the GOP’s control over the Senate and Executive branch could result in continued favorable policies toward corporations. In the case of a Biden win, we could expect a somewhat less enthusiastic response from Wall Street. But, in that scenario, what happens on Capitol Hill is of equal importance. At this time, while they may retain the Senate, there seems little likelihood that the GOP will take over the House of Representatives. Perhaps slightly more possible is the idea of a Democratic sweep of Congress. If Biden were to take the White House, and the Democrats take over Congress, we could see heightened market volatility.
While we see the possibility of certain policy outcomes and related market effects from the various scenarios, we think that expressing any one of them in our investment strategies is unwise. To do so is tantamount to placing a bet on the election outcome. People can do that elsewhere. Our concern is to maintain a diversified approach based on verifiable financial and market data. Whether one candidate or the other is victorious, one party sweeps or there is gridlock in Washington, we will endeavor to maintain our focus on the market events that impact our clients’ investments and adjust portfolios accordingly. We will not place bets on political events.
We’ve touched on only a few of the larger issues we’re considering in the markets at this time. Rest assured that we are staying abreast of day-to-day developments in these and other areas in these interesting times.
Please feel free to contact your Atlas Wealth Management Advisor if you have any questions about this or any other financial matter. As always, we are always available to serve you.
 https://covid.cdc.gov/covid-data-tracker/#cases_casesinlast7days accessed as of 9/24/2020
 https://covid.cdc.gov/covid-data-tracker/#trends_dailytrends accessed as of 9/24/2020
 “Coronavirus: WHO Warns Europe over ‘Very Serious’ Covid Surge.” BBC News, BBC, 17 Sept. 2020, www.bbc.com/news/world-europe-54189575.
 New England Journal of Medicine, Sept. 8, 2020 – “When Will We Have a Vaccine?” — Understanding Questions and Answers about Covid-19 Vaccination, Barry R. Bloom, Ph.D., Glen J. Nowak, Ph.D., Walter Orenstein, M.D.