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Stephens: Pandemic Remains a Threat

Investors have taken their eyes off the threats still posed by COVID-19.
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The pandemic remains a threat to the economy and stock market since the number of cases remains high, argues Real Money’s Bret Jensen.

The U.S. recorded more official deaths from the virus in 2021 compared to 2020, according to data from Johns Hopkins, he pointed out in a recent Real Money piece. The number of deaths rose over 58,000 in September due to the Delta variant, compared to 23,000 fatalities in September 2020.

“What is pertinent is the significant impact that COVID still has on the economy and the markets,” Jensen wrote recently on Real Money. “Investors seem to have taken their eyes off this threat.”

The jobs market remains weak and in September there were 194,000 additional jobs, well below consensus, making it “the worst month for job growth so far in 2021,” Jensen wrote.

The supply chain bottlenecks also persist while commodities continue to rise. The price of crude reached $80 a barrel for the first time in seven years and aluminum prices reached their 13-year highs recently. All these factors will impact the amount of future growth.

“All these factors make me think projections for fourth-quarter GDP growth will continue to come down in the coming weeks,” he wrote.

The current GDP consensus growth estimate is 5.5% for the fourth quarter. Meanwhile, the Atlanta Federal Reserve lowered its GDP growth estimate for the third quarter to 1.3% from a July estimate of 6.1%.

Investors should remain wary about the markets, Jensen argues.

“Falling growth projections probably won't buoy investment sentiment, although they might reduce the Federal Reserve's plans to taper on the margin,” he wrote. “Regardless, the continuing impact from COVID-19 months into the pandemic is just one more reason I remain cautious on the markets.”

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