Can Covid-19 lockdowns, be a thing of the past?

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By Ken Howard

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12 October 2020, 4:20 PM

It may be too early to tell, but it would appear, that the second Covid-19 wave, which started in July in the USA and August in the EU & UK, will have significantly lower hospitalisations and deaths, than the first Covid-19 wave.

That being said, I am still taking the data one day at a time and note that there can be a two to three-week lag between testing, confirming that someone has Covid-19 and knowing if they recover.

To keep tabs on the evolving situation, I have been monitoring the EU CDC (Centre for Disease Control) website and have copied the following charts from their report released on the 24th of September 2020.

The charts show the daily count of confirmed Covid-19 cases and of people dying with Covid-19, (as opposed to from Covid-19) for the period 1 Jan 2020 to 24 Sept 2020.

Source 1

(note the scales are different for each chart, the smooth line is the 7day moving average, Europe is continental Europe so includes e.g. Russia, and America is both North and South America).

There are probably several really good explanations for the lower mortality rate, including;

1. Testing – the level of testing during March and April, would have only confirmed a fraction of the actual number of Covid-19 cases. To illustrate in March, the USA was testing around 50,000 people a day (and probably directed towards those with the most severe symptoms), while in September they were testing around 600,000 people a day (so perhaps a more representative sample).
2. Protection and precaution – during the first outbreak, there was no social distancing, no wearing of masks, and few, if any, precautions taken around aged care facilities.
3. Treatment – Covid-19 is still a novel virus, but in the last six months, after 35 million cases, 26 million recoveries and 1 million deaths (leaving 8 million, currently active cases), a lot more is known, e.g. around the appropriate use of ventilators and the targeted use of anti-viral drugs.

What’s also encouraging, is the decline in the “excess” mortality rate. Due to the fact, that in most countries, close to 80% of people dying with Covid-19, have a serious pre-existing medical condition, such as cancer or heart disease, it is very hard to tell, how many people are dying from Covid-19 as opposed to dying with Covid-19.

So the measure of excess mortality attempts to address this by comparing the current weekly mortality rate, from all causes, with the average weekly mortality rate, from all causes, from the last 5 years. If the current mortality is statistically above the average, then arguably it is because something like Covid-19 is having an impact, just like H1N1 in 2017/18.

The chart below is for the EU and is published by the EU Mortality Monitor (week 38), and tracks all causes of mortality, weekly data (average 50,000 to 60,000 deaths per week), from 24 participating EU countries.

Source 2 (the 17 & 34, above refer to 17^th and 34^th week in the respective calendar year)

The data below is for the USA and is published by the USA CDC (Centre for Disease Control) and shows a similar pattern. The blue bar is the predicted mortality (averaging close to 60,000 per week), the orange line is the threshold for excess deaths and the red crosses mark weeks of “excess” mortality.

Source 3

For both the USA and the EU there was an alarming spike in March, April and May, but so far, the second wave has been less pronounced, (although I would caution, there can be delays in collecting mortality data).

I would also like to note a report, published by the US CDC on the 10^th of September, based on data collected up until the 8^th of August, which showed the US CDC’s current best estimate for survival, if you catch Covid-19, based on your age. Source 4

The estimates are just that estimates, and they are based on the CDC’s assessment of the current US scenario, which can and probably will change. The virus is not bound by any rule book, or predetermined scenario and for every individual, it is a question of their own health not general population survival probabilities. 

Lastly, I would like to note an article I read on Covid-19 testing, in particular about the PCR test, which is seen as the gold standard and used by many countries around the world. The great thing about the PCR test, is that at the right amplification, it can detect even the smallest residue of Covid-19, however what it cannot do, is tell you whether the patient; is ill, was ill, or will be ill, nor does it tell you if they are contagious. According the US CDC, PCR tests can detect the presence of small fragments of Covid-19, even 3 months after a person has recovered.

In other words, a positive test could mean anything from; (a) you had Covid-19, three months ago and have fully recovered, or (b) you have Covid-19, are not contagious and will recover, or even (c) you have Covid-19, are highly contagious and will be fighting for your life. In other words a positive test result, will tell you something but not enough to draw any meaningful medical conclusions, for that you will need more data. Source 5

Simply reporting test results and death rates is not the full picture, the reality is far more nuanced and complex, which is why we are so reliant on the political leaders to make the right choices. Looking at the data, I can understand why there was such an extreme political response during March & April, 30,000 excess deaths per week, in the US and EU, is hard to ignore.

As a result, tens of millions of people were detained in their homes, schooling was cancelled and 20% to 30% of the working age population lost the right to work. Globally, the direct financial cost of these decisions will be measured in the trillions and taxpayers everywhere, will probably have to commit something like 10% of their wage, for the next decade, just to pay for the Government’s 2020 responses to Covid-19, replenish their savings and repair their businesses and careers.

I know the market has been trending sideways for the last couple of months, nervously watching the second wave and trying to gauge the social and political response.

So while I would love to believe it is all behind us, its not, so my recommendations remain:

1. make sure you have enough cash and cash flow to be patient,
2. stick to the quality (proven businesses with strong balance sheets),
3. diversify and
4. keep watching the medical data, because neither the optimist nor the pessimist actually know how it will turn out, so any predictions are just that predictions and we all have to wait for the actual data.

As always if you have any questions about your portfolio or your strategy, please call on 07 3334 4856.

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Ken Howard is a Private Client Adviser at Morgans. Ken's passion is in supporting and educating clients so they can attain and sustain financial independence.

If you would like to learn more about assessing your finances, you can contact Ken or your closest Morgans branch.

General Advice warning: This article is made without consideration of any specific client’s investment objectives, financial situation or needs. It is recommended that any persons who wish to act upon this report consult with their investment adviser before doing so. Morgans does not accept any liability for the results of any actions taken or not taken on the basis of information in this report, or for any negligent misstatements, errors or omissions.