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Bullish and bearish COVID-19 developments

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The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance fund. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. Past performance is no guarantee of future results.

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      By Marshall L. Stocker, Ph.D., CFADirector of Country Research and Portfolio Manager, Eaton Vance Management

      Boston - Headlines tracking the scope of the coronavirus pandemic — such as new daily cases and death rates — may be driving investor sentiment. We've also been monitoring other key reports to gain some visibility into how much longer the crisis could continue. Here are the latest health and public policy updates related to COVID-19, developments that we consider either bullish or bearish, and the economic and market impacts.

      Health and policy updates

      • Companies are considering repeatedly testing employees for COVID-19 to help minimize workplace risk.
      • Italian auto manufacturer will use antibody testing as a screening tool for returning workers and require employees to use a contact-tracing app.
      • US social media firm will not hold large events for the next 14 months, until July 2021.
      • Legal liability is deterring movie theaters from re-opening, in defiance of Georgia Governor Kemp's order.
      • Singapore's "second wave" continues, as cases grow 11.1% in a 24-hour period this past week.
      • Forecast: It's possible that within months, a therapeutic drugs regimen could be identified that would moderately improve the prognosis and lower the fatality ratio.

      Bullish virus developments

      • The FDA has approved the first at-home test for COVID-19, which requires the user to send a nasal swab specimen to the manufacturer for testing; this is a polymerase chain reaction (PCR)1 test for COVID-19, not an anti-body test.
      • Bloomberg has reported that antibody treatments may be the best therapeutic hope; one biotechnology company's treatment using antibodies of recovered patients could be available this fall.
      • Hong Kong reported no new daily cases for the first time since the pandemic's outbreak; gatherings of more than four people were banned through April 23.
      • Vietnam reported no new daily cases for the first time in over a month.

      Bearish virus developments

      • Her autopsy revealed that a patient in Santa Clara County, California, died of COVID-19 on February 6 — 23 days before the first US death was declared.
      • CDC director warns that a second wave of coronavirus coinciding with the start of the flu season could be even more difficult, further stretching healthcare capacity.
      • Italian doctors report a patient's ocular swab tested positive 27 days after her nasal swab tested negative, suggesting that eye-touching could be a transmission vector long after nasal transmission ends.
      • Similar to other coronaviruses, it is possible to become infected with COVID-19 more than once, according to Professor Sarah Gilbert of Oxford University who is leading a team developing a vaccine.
      • Antibody presence may not confer immunity; the human immune system does not develop strong immune response to every virus.
      • Warning: A plethora of "general population" antibody tests are being conducted, but we caution that the results of these tests, which are not expected to be particularly accurate due to biological reasons, must be cautiously interpreted.

      Economic and market impacts

      • US Senate has passed the third economic stimulus package related to the pandemic, a $484 billion spending program aimed at supporting small businesses.
      • China lowered the one-year prime rate by 20 bps to 3.85% and the five-year prime rate by 10 bps to 4.65%.
      • Mortgage servicer has estimated that more than 2.9 million mortgages are in forbearance as of April 16 — representing 5.5% of all active mortgages totaling $651 billion in unpaid principal balance — including 1.4 million borrowers whose mortgages are backed by Fannie Mae and Freddie Mac.
      • Federal Housing Finance Agency (FHFA) Director Mark Calabria said last week that he expects approximately 1 million government-sponsored (GSE) mortgages to be in forbearance by May.

      Bottom line: Inferences about case fatality ratios made using antibody test results are likely to be incorrect, but such headlines may capture the imagination of many policymakers.