A discussion on the covid second wave, and its potential impacts on the economy.

1. COVID 2.0
28 May 2020

2. WAR ROOM
Idea Generation
Macro Coaching
Scenario Updates
HiddenLevers runs on SCENARIOS like Instagram runs on PHOTOS
Fed Underwrites EconomyClimate DisastersReal Estate “Post” CovidTrump Agenda

3. RETIRING SCENARIOS FULLY PRICED IN
Mitigating Factors
GOOD
S+P 500
2200
-17%
S+P 500
3150
+20%
S+P 500
2875
+10%
US Lockdowns Work
UGLY
Dysfunctional Opening
BASELINE
V-shape
GOOD
S+P 500
1760
-33%
S+P 500
3040
+16%
S+P 500
2300
-13%
UGLY
BAD
U-shape
L-shape
CORONAMERICA GLOBAL RECESSION
MAX
DRAW
DOWN

4. sources: CNBC, COVID Tracking Project, Fox
South/West regions have fueled the recent uptrend in daily
Coronavirus numbers while the Northeast seems to have
finally gotten the pandemic under control
increase in daily cases is NOT an increase in daily fatalities
Daily new Coronavirus Cases Regional Positive Cases Per Million Pop. 7-Day Average Line
Northeast Midwest South WestU.S. Total
COVID PULSE CHECK
FLORIDA - Ignorance is
bliss
NYC – no innocence

5. sources: Worldometer, United States Census Bureau
USA Covid Infections USA Daily Deaths
COVID PULSE CHECK
– 70%
+46%
daily confirmed cases have increased
daily deaths decreased
Covid surging in regions with younger
populations

6. sources: MarketWatch, The Economist, CNBC, FRED
United States is expected to contract by 8% this year with an estimated contraction of 5.9% in April.
-IMF, 25 June 2020
Gas Consumption Same-store Sales Surgery Cancellations %Air Travel
ECON PULSE CHECK
50% of GDP dropQ4 2008 GDP Drop -8.4%
Q2 2020 GDP Drop Likely similar

7. EARLY
VACCINE
COVID 2.0 Potential Health Outcomes
10 Vaccine Candidates
in clinical trials today
New COVID19 Cases per Day
USA Brazil
EUCanada Japan
UNIVERSAL
MASKING
DOA in USA despite
global successes?
ROLLING
LOCKDOWNS
UT / NC / OR / LA / TX
hitting pause
sources: HiddenLevers, The Lancet, Our World in Data, NPR, Business Insider, STAT News, CNBC
BYE BYE
BOOMERS
body count accepted:
over-65 have 10x risk
NO VACCINE
Researchers say v1
more like a flu shot
Parity of Health Outcomes
Every other G7 Country has Covid under control
USA + Brazil most politicized + most infections… hmm

8. sources: HiddenLevers, ABC Australia, Albartlett.org
COVID 2.0 Global Comparison
New Covid Infections Per Day – 20 June 2020

9. sources: HiddenLevers, The Balance, MarketWatch, CNBC
COVID 2.0 Consumer Spending

10. sources: HiddenLevers, MarketWatch
COVID 2.0 Economy > Body Count
SWEDEN chose economy > body count DENMARK put public health first.

11. sources: HiddenLevers, Pittsburg Post-Gazette, The Balance, MarketWatch, CNBC
COVID 2.0 Consumers Not Spending
March + April - Expanded of benefits
Fed stimulus payments
Jobs -22 million
After-tax income +11%

12. COVID 2.0 Sector Recovery Comparison
source: HiddenLevers
Technology +12.1%
Discretionary +1.1%
Healthcare -3.5%
Industrials -17.6%
Financials -24.4%
Energy -36.0%
50% divergence
between Tech and
Energy YTD

13. sources: HiddenLevers, Standard + Poors
COVID 2.0 Major Nasdaq Divergence
+10%NASDAQ
S+P 500 –6%A handful of growth stocks
that have surged this year
have an outsize influence on
Nasdaq + SPX Only S+P sectors in positive territory for
2020
information technology
consumer discretionary
communication services

14. sources: HiddenLevers, WSJ
COVID 2.0 Tech Imperialism
2009
12%
2020
16%
2003
14%
1983
14%
2018
12%1999
10%
Large cap tech agnostic behavior:
- makes it a defense play
- makes diversification harder
- makes indexing seem not that great
Deflationary Power of Tech Evident
NASDAQ OUTPERFORMANCE

15. SCENARIO REPLACEMENT
Coronamerica
COVID 2.0Dysfunctional Opening
Mitigating Factors
US Lockdowns Work

16. public / private
partnership key
new vaccine usually
5-10 years
Improbable
upside
Early Vaccine
COVID 2.0 BLACKSWAN

17. COVID 2.0 GOOD
politically divisive
for no reason
universal masking
flattens the curve
Governors finally
pushing pause
Public Health
De-Politicized

18. COVID 2.0 GOOD
Public Health
De-Politicized politically divisive
for no reason
universal masking
flattens the curve
Governors finally
pushing pause

19. COVID 2.0 BASELINE
election year optics
above health
big company
lock downs
Economy > Body Count
travel restrictions
kill wanderlust

20. COVID 2.0 UGLY
New nationwide
record set 24June
US starkly higher
than G7 countries
election year
optics backfiring
US Second Wave

21. BLACKSWAN
S+P 500
2500
-18%
S+P 500
3750
+23%
S+P 500
2900
-5%
Economy > Body Count
UGLY
US Second Wave
BIG COMPANIES + STATE
GOVERNORS BACKTRACK
VACCINE SHOULD BE LOOKED
AT AS MIRACLE NOT
BASELINE OUTCOME
POLITICAL + ECONOMIC
EXPEDIENCY IN AN
ELECTION YEAR
COVID 2.0 MACRO RISK PARITY
Daily Deaths
few
Daily Deaths
1000
Daily Deaths
2500
BASELINE
Lockdown
regional
Lockdown
none
Lockdown
self
imposed
Early Vaccine

22. SCENARIO REPLACEMENT
Global Recession 2020 Recession
L-shape
V-shape
U-shape
Life on Zoom
Unemployment Cuts Spending
Vibrant Life Resumes

23. 2020 RECESSION GOOD
continuing claims
now slowing
consumers spend
not hoard
May jobs # huge
upside surprise
Vibrant Life
Resumes

24. 2020 RECESSION BASELINE
benefits boost
ending in July
WFH folks
not spending
jobless
not spending
Unemployment
Cuts Spending

25. 2020 RECESSION UGLY
virtual life
permanent
large cap tech
thrives
energy + travel
die
Life on Zoom

26. GOOD
S+P 500
1800
-40%
S+P 500
3500
+15%
S+P 500
2350
-23%Unemployment
Cuts Spending
UGLY
Life on Zoom
WFH --> LFH --> DIGITAL JAIL
CIRCA 2019
AMERICAN AFFLUENZA
COVID FALLOUT TRIGGERS
EXTREME PESSIMISM AS JOB
LOSSES LAST LONGER
2020 RECESSION MACRO RISK PARITY
Retail Sales
+3.25%
Retail Sales
-10%
Retail Sales
-16%
BASELINE
Vibrant Life
Resumes
US GDP
-8.7%
(-8.9%)
US GDP
2.0%
(+1.8%)
US GDP
-3.0%
(-3.2%)

27. Second wave here, deaths decreasing while
infections increasing
Economy > Body Count did not work in Sweden
Permanent shift to virtual life is a way bigger
GDP killer than any temporary shut down
COVID 2.0 WHAT TO SAY
US Governors pushing pause likely too late

28. 2020 ELECTION JULY WAR ROOM