by Maurice (Mo) Spolan, Investment Research Analyst
Markets behaved relatively calmly last week as the S&P 500 gained about 2%. Nevertheless, investor attention has returned to the COVID-19 cases trend-line. Twenty-three states are currently reporting increasing cases, including 12 with record daily case figures. Mounting positive tests are the result of increased social activity, which provided for strong May retail numbers as sales increased more than 17% from April’s trough.

Unfortunately, for as long as we are without a vaccine, improving economic data is likely to be met by rising cases. This is because both outcomes are the result of increasing social activity. The financial markets value economic and corporate data, and so we are likely to see asset prices rise or remain steady as such data improves on the back of greater social mobility. Regrettably, however, as noted, this very social mobility seems to be the primary driver of viral spread. The main risk to the financial markets today is that the healthcare system becomes overpopulated as cases rise and additional shutdowns are made necessary. Unless such a scenario comes to pass, we should not expect the market to react unfavorably to rising cases, because rising cases are nearly certain to be accompanied by improving economic data.