The marathon race of vaccination versus variant spread is continuing

We’re in middle of an ultra-marathon. You may not be familiar with “ultras.” These aren’t ordinary marathons. A traditional marathon is just over 26 miles. An ultra is longer. Some are 100 miles, and some are much longer. There are ultras that take place over several days and cover distances as long as 1,000 miles.

All of us around the world are in an “ultra” that has a finish line. The finish line is some broad form of global “herd immunity” from Covid-19 and its various mutations. What is not clear is how long it will take us to reach it.

We can certainly be encouraged that the United States has made significant progress to vaccinate its population. However, there are over 7.7 billion people on the planet. It’s imperative that global leaders unite to vaccinate enough people to corral the virus and stop its spread.

COVID-19 – The Numbers

Globally, across 213 countries and territories, there have been over 127 million confirmed cases and nearly 2.8 million deaths. In the United States, over 30 million have been infected and over 549,000 have died.

The Markets

The stock market continues to suggest that investors are highly optimistic that the end of the pandemic is nearing.

This past Friday, the Dow Jones Industrial Average rose by 453 points, or 1.39%. The S&P 500 index increased 65 points, or 1.66%. The Nasdaq rose 161 points, or 1.24%. For the week, the Dow rose 1.4%, the S&P 500 index increased 1.6%, and the Nasdaq fell 0.6%.

Spot gold traded at $1,731 on Friday, up 0.38%. West Texas Intermediate Crude futures for May 2021 delivery traded at $60.726 a barrel on Friday, up 2.16%. You’ve likely noticed that gas prices are up significantly at the pump, an indication that the economy is recovering.

10-Year Treasury Note

Friday the yield on the 10-year Treasury Note was 1.674%. Please read on for our thoughts about the bond market.

CNBC 10Y Bond 2021 03 28

Source: CNBC


As you can see from the chart below, the number of daily infections from Covid-19 have fallen significantly from the peak a few months ago. However, the number is still over 50,000 a day and there has been an increase in the seven-day moving average.

This is concerning, because it suggests the possibility of yet another surge of infections, hospitalizations and deaths.

As Americans resume traveling, dining out and visiting indoor public venues, public health officials worry that people are ignoring their calls for continued vigilance.

CDC Cases Trend 2021 03 28

Source: CDC


As vaccinations have increased, testing has fallen. What is more disturbing is the rising positivity rate over the past few weeks.

JHU Testing Positivity 2021 03 28

Source: Johns Hopkins University


The rate of hospitalizations has also plateaued. Our hospitals are not overwhelmed, as they are in parts of Europe. However, health authorities would like to see the rates of infection and hospitalization to be declining at a faster rate.

CDC Hospitalizations 2021 03 28

Source: CDC


We have lost a staggering number of our fellow citizens to the coronavirus. The number of deaths per day is declining. But, the figure has also leveled out at an unacceptably high rate.

CDC Daily Deaths 2021 03 28

Source: CDC

The Institute for Health Metrics and Evaluation (IHME) at the University of Washington projects that a total of between 590,000 and 656,000 Americans will die from the virus by June 2021. The variance is driven by mask usage, vaccinations, and other containment strategies.


The United States has made impressive progress in its efforts to vaccinate Americans. The Biden administration had pledged 100 million vaccine doses in its 100 days. It made that goal prior to its 60th day in office. Last week President Biden that 200 million doses will be administered by the 100th day.

The U.S. is now averaging 2.5 million doses per day. We know that many of you are among those who have been vaccinated.

CDC Vaccination 2021 03 28

Source: CDC

The Labor Market

The nation’s labor market continues to heal. New claims for unemployment benefits fell to 684,000 last week. This is less than the pre-pandemic weekly high of 695,000 set in October of 1982. An oddly encouraging sign.

An additional 242,000 applied for claims under the Pandemic Unemployment Assistance program which supports gig and self-employed workers. The total number of claims for all kinds of unemployment benefits was just under 19 million for the week ended March 6. There are still 9.5 million jobs missing since the pandemic began early last year.

US employers added 379,000 jobs in February. The Federal Reserve projects that, by the end of 2021, unemployment will fall from the current rate of 6.2% to 4.5%, and that the economy will grow at its fastest pace in four decades.

TE Jobless Claims 2021 03 28

Source: Trading Economics

Household Spending and Income

Consumer spending fell 1% in February, according to the Commerce Department. Economists attributed the drop to winter weather that struck much of the country, temporarily shuttering business and keeping consumers home.

Household income fell by 7.1% in February. However, income was up 10.1% in January, because of the federal government’s coronavirus relief package, which included checks for most American households.

Income and spending are expected to rise in coming weeks as additional checks are distributed to American households. In addition, unemployed workers will receive an additional $300 per week in jobless benefits.

Monetary Policy

The Chairman of the Federal Reserve and the Secretary of the Treasury Department testified before the House Financial Services Committee and the Senate Banking Committee last week. Both expressed confidence in the economic recovery and promised continued strong support for American businesses and households.

Fed Chair Jerome Powell said, “the recovery is far from complete.” He pledged to maintain the Fed’s benchmark short-term interest rate at near zero and to continue massive monthly purchases of Treasury debt and mortgage-backed securities until the economy makes “substantial further progress.”

Treasury Secretary Janet Yellen expressed confidence that the United States would be able to serve its large and growing national debt without raising concerns. She said that federal debt service requirements are lower now in relative terms than they have been in the past.


As the graph of the 10-Year Treasury Note above suggests, investors growing increasingly concerned about inflation. They point to easy monetary policy, strong economic growth, supply-chain disruptions, massive federal spending, and national debt to justify their worry.

The Federal Reserve continues to jawbone against the expectation that it will raise rates. The Fed projects annual inflation, measured by the personal consumption index, to reach 2.4% by the end of 2021 and then drop to the Fed’s target of 2% next year. It does not anticipate any rate increases until at least 2024.

This jousting between the Fed and its doubters is a nearly daily occurrence. Time will tell what will happen with inflation and how the Fed reacts to it.

Navigating the Bond Market

The bond market presents great challenges for investors. The Federal Reserve controls the short end of the yield curve. Investors control the rest of the yield curve.

The Federal Reserve has indicated, as noted today and in our previous commentaries, that it intends to keep its benchmark interest rate near zero for several years. In response to this stance, we have elected to incorporate a broader set of bond asset classes in our model portfolios. We now include investment grade international bonds and investment grade intermediate term US bonds. We continue to use short term investment grade US bonds.

Interest rates and bond prices move in opposite directions. When interest rates rise, bonds prices fall, and vice versa. Longer term bonds are more sensitive to interest rate changes than shorter term bonds.

We believe the primary role of bonds in a portfolio is dampen overall volatility. We want to reduce portfolio risk. We’re less concerned about generating returns from bond holdings.

As you review your first quarter portfolio performance report, you may see a negative return for the bonds you own. This is directly related to the upward movement in longer term interest rates. We see this above in the chart for the 10-Year Treasury Note.

We’ll continue to monitor the interest rate environment and its impact on the bond market. If you have questions about the role of bonds or their performance in your portfolio, please reach out to us.

Turning the Corner

Last week Dr. Anthony Fauci, a key figure in the battle against Covid-19, said when asked if the United State was turning the corner on the virus, “We are at the corner. Whether we are going to be turning that corner still remains to be seen.” Indeed, our review of the data supports his view.

Let us hope that we can make that turn.

Keep the faith, get vaccinated when you can, be safe, and stay healthy.


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