Market volatility and measuring reopening’s effects

Daken Vanderburg

By Daken Vanderburg CFA
Daken Vanderburg is Head of Investments for Wealth Management at MassMutual.
Posted on Jul 1, 2020

When we first began these updates, we promised to try to objectively provide a clear-eyed analysis of what was occurring in the world. Initially the focus was on COVID-19 and related market behavior, and eventually it expanded into economics.

Nonetheless, we wanted to:

  • Provide perspective on what was occurring, and
  • Use history as a lens to help us understand its magnitude. The goal, therefore, was to allow us all to be better informed, and as such, to make better decisions.

This mandate also requires us to be transparent when bad news is occurring, as rose-colored glasses rarely improve decision-making.

At the same time, I asked (and continue to ask) that you try to set aside your political views while you read this analysis. I try very hard to avoid politics and clairvoyance, and, as much as possible, ask my readers to do the same.

Therefore, what follows is a bit complicated: think of it as a bad news / good news update. There is plenty to worry about (as news channels remind us constantly), and yet there is perhaps some good news as well. I try to objectively cover both as I strive to help readers better understand what is occurring.

In the spirit of transparency, let me state upfront this entire update is focused on the COVID-19 pandemic as that is seemingly all that is driving markets right now.

And for those of us prone to impatience, let me state clearly that global growth rates of COVID-19 continue to fall but have leveled out, U.S. growth rates of COVID-19 cases are again (and unfortunately) rising, and yet U.S. death rates are falling just as quickly as they ever have. As with most things, in the middle of chaos what appears obvious often isn’t …

With that, let us begin.

Where we stand

As of the morning of June 30:1

  1. The novel coronavirus (COVID-19) has infected more than 10.4 million people and killed more than 506,000 people worldwide.2
  2. In the United States, there are now more than 2.6 million confirmed cases along with more than 126,000 deaths.3
  3. Brazil is now second behind the United States with roughly 58,000 deaths, followed by the U.K. with 43,000 deaths, and Italy with 35,000.

These are terrible and tragic numbers, and deserve our mourning, as well as our attention.

And yet, we have a hard time conceptualizing those numbers without perspective.

Chart 1 helps to clarify that picture by showing both the absolute numbers and the changes.

chart 1

The blue lines demonstrate the total number of cases around the world and correspond with the left axis. The grey line demonstrates how the number of cases is growing and corresponds with the right axis. On March 22, growth rates were roughly 20 percent per day.8 Today, those growth rates are consistently around 1 percent per day.5 So, case growth has unambiguously fallen worldwide; this is great news. Unfortunately, the growth rate has not fallen further, and has hovered between 1 percent and 2 percent daily since late April.

Within the United States

Within the United States, in aggregate, the picture is a bit more complicated. On March 21, the U.S. growth rate was 40 percent. As of June 16, the daily growth rate fell below 1 percent. Unfortunately, it is now back to approaching 2 percent daily again. This obviously ignores the complexity of the contrast between the increases in some places (for example Texas and Florida) with the decreases in other places (for example New York and Massachusetts), and instead focuses on the aggregate as that is a more reliable dataset.

Chart 2 puts those growth numbers in context by showing how the number of days to double has changed over the past several months.

chart 2

Clearly the United States made incredible progress over the March-through-mid-June timeframe. And yet as reopening has begun, the growth rate of the number of cases has accelerated. This is both logical and disappointing but was largely to be expected. In the absence of a vaccine, and particularly with a decline in social distancing and basic precautions, case transmission will increase as economies reopen.

Before we turn to other measures, given the increase in U.S. growth rate of cases, perhaps the question is how does the United States compare to other countries that have had similar reopenings?

Chart 3 helps demonstrate that dynamic.

chart 3

The lines in this chart represent the daily growth rate of cases for each country. The blue line shows how fast the number of cases is growing in the United States, the orange shows the same for the U.K., and the like. The takeaway is that the countries all had similar levels of growth (between 10 percent and 15 percent) in early April, and then all declined precipitously.

As all have reopened to one extent or another, they have also all (with the U.K. as the exception) experienced similar increases in growth rates. Japan is most dramatic of all with cases shrinking daily, and is now growing again, but roughly speaking, all countries in this chart show a similar trend.

Interestingly, and perhaps surprisingly given the latest press coverage, the United States is experiencing a pattern of increased case growth similar to other countries, and is not really an outlier either way. The U.K. shows the most promise as its growth continues to fall, but Brazil, Japan, and U.S. all are now steadily increasing.

Therefore, what? From a U.S. perspective, we had massive case growth and unprecedented uncertainty, and we shut the country down while we worked to understand what was occurring. This saved thousands (if not hundreds of thousands) of lives, and yet also came at a massive economic cost. We then reopened economies (albeit some states were slower and more methodical than others), and we are now seeing the growth rates of cases increasing again while also seeing quickly improving economic data.

The knowledge effect?

Perhaps there is another lens through which we could view this? I have wondered recently what impact an increasing knowledge base has on this pandemic, and the commensurate growth and death rates. Said another way, if we learned that this virus is most dangerous to specific segments of the population, is it possible to slowly and carefully reopen the economy while also protecting those most vulnerable?

Chart 4 tries to provide perspective into that question.

chart 4

The blue line represents the daily growth rate of cases in the United States since May 1. This is the same data we have seen in other charts. This clearly shows the increase in the growth rate beginning in early June. The orange line, however, is data we haven’t yet reviewed. This shows the daily growth rate in deaths in the United States.

Prior to the beginning of June, both growth rates were declining at very similar trajectories. They had both come from very high levels, and we, as a country, had worked very hard to get them down.

Yet once the country began to reopen, the number of cases first flattened out, and then began growing again. This is as expected, and as discussed so far. Perhaps what wasn’t expected is that the growth rate of deaths from COVID-19 continues to fall relatively quickly.

To make that clearer, at the beginning of May, both growth rates were around 3 percent per day. Implicitly, that means the number of cases (or deaths) was doubling roughly every 20 days.

Now, at the end of June, the growth rate of cases is back near 2 percent (after falling to 1 percent), whereas the growth rate of deaths is now less than 0.5 percent.9 This implies that the number of cases is now doubling every 41 days, but the number of deaths is now doubling every 178 days.

This is a remarkable difference. While I will hold on attribution (as it isn’t precisely clear and could be relatively controversial), this is good news.

For what it is worth, I also am not stating that this trend will hold. We have seen the changes in death rates trail the changes in case growth rates, and this might follow that path. Nonetheless, I am optimistic to see that perhaps as a result of our learning, our experimentation, and our methods of treatment, our death rates continue to decline despite the number of cases accelerating.

Investments? Focus on long term

Lastly, and in closing, as a data-scientist by night and a Head of Investment by day, I would be remiss to not mention how these observations should relate to our portfolio decisions.

In short: they shouldn’t.

How to manage your portfolios, how to save, how to plan, and how much risk to take should be driven by a thoughtful analysis that is focused on the long term. Trying to time a market … particularly a market so currently driven by changes in an exogenous factor like COVID-19 … is not only difficult, it is dangerous. Trying to time the market is likely to expect in losses, and is certain to cause you mental anguish. Even the most seasoned professionals don’t do it well, which leaves the rest of us with a very difficult proposition indeed.

Build a plan with your investment professional. Think about returns from capital markets over the long term, not the short term. Save as much as possible, and control what can be controlled.

In closing, stay safe, stay calm, and please turn off the financial news channels.

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________________________, as of June 30, 2020

2 Johns Hopkins University,, as of June 30, 2020

3; as of June 30, 2020

4 Sources: Bloomberg, World Health Organization

5 Source: Johns Hopkins University,

6 Sources: Bloomberg, World Health Organization, as of June 29, 2020

7 Sources: Bloomberg, World Health Organization, as of June 29, 2020

8 Sources: Bloomberg, World Health Organization, as of June 30, 2020

9 as of June 29, 2020

This material does not constitute a recommendation to engage in or refrain from a particular course of action. The information within has not been tailored for any individual. The opinions expressed herein are those of Daken J. Vanderburg, CFA as of the date of writing and are subject to change. MassMutual Trust Company, FSB (MassMutual Trust) and MML Investors Services provide this article for informational purposes, and does not make any representations as to the accuracy or effectiveness of its content or recommendations. Mr. Vanderburg is an employee of MassMutual Trust and MML Investors Services, and any comments, opinions or facts listed are those of Mr. Vanderburg. MassMutual Trust and MML Investors Services, LLC (MMLIS) are subsidiaries of Massachusetts Mutual Life Insurance Company (MassMutual).

This commentary is brought to you courtesy of MassMutual Trust and MML Investors Services, LLC (Member FINRA, Member SIPC). Past performance is not indicative of future performance. An index is unmanaged and one cannot invest directly in an index. Material discussed is meant for informational purposes only and it is not to be construed as specific tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, it is not guaranteed. Please note that individual situations can vary, therefore, the information should be relied upon when coordinated with individual professional advice. Clients must rely upon his or her own financial professional before making decisions with respect to these matters. This material may contain forward looking statements that are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. 

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