24 November 2020

Insights

Thanksgiving - No Double Doughnut Day

America's iconic Thanksgiving holiday is going to provide a litmus test on the state of the second COVID-19 wave.

More Americans flew on Sunday than on any day since March, with over a million people screened at airports over the four days (Thurs-Sun); almost four million people having taken to the air. While this is the highest rate of flight-travel since the pandemic took hold, it is well down on 2019 numbers when 9.5 million travellers were screened at US airports over the same period.

Trip Advisor's travel index (released 9 Nov) revealed that over half of Americans intended to travel for Thanksgiving, although 76% were expecting to travel by road rather than air. Memories of Chevy Case and John Candy’s road trip in the movie 'Trains, Planes and Automobiles' spring to mind.

Turkey sales are surging according to Forbes magazine, with record high prices per pound. Turkey prices are almost 35% above their 4-year average. Lower production numbers due to the pandemic may have reduced supply.

As an aside, there are ~40mio turkeys purchased in the US at Thanksgiving resulting in an estimated 200mio pounds of turkey meat being thrown out.

Why does all this matter?

Despite the success of almost all the vaccine tests, distribution will be challenging and as yet the vaccine is not widely available. Thanksgiving will test whether the second wave has indeed peaked in the US.

Global: Daily change in confirmed cases (7dma) Source Goldman Sachs

Hospitalisation rates have soared globally.

Daily Population Hospitalised for COVID per million. Source Goldman Sachs

Thankfully, fatalities are lower than earlier in the year. The fatality rate per million in the US was never pushed significantly lower unlike other countries.

Source Goldman Sachs

According to the CDC the US had almost 300,00 more deaths between January and October than is typical for the same period in previous years, 2/3 of which it has attributed to COVID-19.

All of which argues that authorities in the US did not do enough to prevent the spread of the virus, a fact Westpac points out in the relative change in Central Bank balance sheets. The chart shows COVID case per mio vs the expected growth in Central Bank balance sheets.

Source Westpac

What was more important in the COVID response tool box? Social restrictions vs policy stimulus. Both played a role and whether countries got the balance right may depend on how you measure the outcome, but lives saved is the priority.

Yet US equities are trading at all-time highs as increasingly bullish sentiment is showing itself in much higher valuations. An index of multi-cap median P/E is now over 3std above its long-term average. Its highest reading ever. The US homebuilders’ sentiment index is also at all-time highs.

A double doughnut day has become slang for no new community transmissions and no new COVID deaths on any given day.

America may be the home of the doughnut, but a double doughnut day is a long way away.

David (Bushy) Nolan

Beckon Capital Pty Limited (ABN 49 628 013 678), authorised representative No. 001280538 of Fundhost Limited (ABN 69 092 517 087, AFSL No. 233045) (“Beckon”)