12/22/2020 — The COVID Strikes Back

I didn’t fully comprehend the expansive reach of The Empire when I first experienced Star Wars, so I felt pretty confident that by the end of the original film, The Rebellion had put an end to Darth and The Gang. A massive explosion, people cheering, and an elaborate awards ceremony tend to signal a decisive victory. As such, The Empire managing to strike back truly surprised me.

When COVID struck back early yesterday morning with a supposedly new, fast-spreading strain, it inspired one of the more lackadaisical selloffs in recent memory. No one seemed too surprised, or overly interested because the pandemic continues to loom large in our daily lives. The 80 point tumble in the S&P 500 may have briefly captured the imagination of industry bears, but the overall sentiment was one of inevitability. The inevitability that the market would weather its intermittent plunges, quickly discarding the jitters and resuming its slow return climb to all time highs.

Unlike the Star Wars reversal, current market spectators never believed that the antagonist had been vanquished. In fact, the pandemic appears to have the upper hand as COVID related deaths rally to their highest levels yet and show little sign of abating. We are still waiting for our own Return of The Jedi in the shape of day-to-day normalcy. For its part, the new strain appears spread quickly, but shows no signs of being anymore virulent, or giving any indication that it may be resistant to vaccinations.

But none of this really matters. The market treated the “revenge” of COVID with the same gentle skepticism that it has all news items since the presidential election and announcement of completed vaccine trials. By neither ignoring, nor truly taking seriously the threat of an enhanced pathogenic killing machine, US markets ultimately retreated to their current default posture, which is to briefly satisfy newsworthy items with a perfunctory dip, but remain ready to sate the influx of dumb money with a quick return to market peaks.

With real unemployment (not the bogus numbers championed by The Bureau of Labor Statistics) higher than at any point since the Great Depression, the glut of capital being thrown into stock markets promises to buoy recent gains — even as the pandemic reaches its most deadly levels. However, as short-lived as it was, Monday’s volatility spike to a 31 level reminds that any substantial vaccine glitch, or major political misstep could send inexperienced punters tripping over themselves in search of an exit.