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Coronavirus - COVID-19

Wells Fargo: 2020 Market Is Too Iffy to Put New Money In

The election and the virus could trigger another stock slump, says strategist Christopher Harvey.
By Larry Light



The investment arm of Wells Fargo doesn’t want to put a dime more into stocks this year because its investing strategist thinks the market is too precarious, owing to the coronavirus and the election.

In Christopher Harvey’s estimation, the S&P 500 likely will end 2020 down 6.3% from Monday’s closing price. Pandemic and election worries, plus some negative economic signs that could hobble the recovery, have set off a four-week stock slide, making yesterday’s 1.6% advance welcome.

Still, Harvey, Wells Fargo Securities’ head of equity strategy, told CNBC that he believes 2020 has hit its market high, which occurred Sept. 2, and it won’t top that.

Deploying fresh investments is foolish as long as the outcome of the presidential election is unclear, he said. He expressed hope that the debate between President Donald Trump and former Vice President Joe Biden tonight provides some clarity. Biden is currently ahead in polls, although, as the 2016 contest showed, things could change radically.

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The worst-case scenario, from an investor’s standpoint (not to mention a citizen’s) is a post-election legal fracas over vote totals, he indicated. “If the debate tightens the race, one of the things that we worry about is the probability of a contested election,” Harvey said. “In a contested election, we can see 10% downside to the equity market.”

Then there’s the COVID-19 problem. “The market has a tendency to shoot first and ask questions later when it comes to COVID,” he said,

Taken alone, worrisome news about the virus could shave 2% to 4% from the market, he said. He fears stocks will tumble into a correction, amid a 50% volatility spike. September has seen a rise in US cases, although recently they seem to have flattened out. Nevertheless, he said, the infections could “break either way.”

Despite all this near-term gloom and doom, Harvey said he was optimistic about 2021. Chief reason: A vaccine should be in hand to eradicate the virus. “We’re longer-term positive because we do think there’s a COVID solution that hits the marketplace,” he said. Plus, earnings in next year’s first half will look good compared to the lousy showings in 2020’s first two quarters.

Post-pandemic, Harvey said he thinks industrial stocks will do well. They are what he calls “COVID beta” shares, meaning they should be central to market moves once infections are an unpleasant memory.

“What you need to see is just a gradual improvement,” he said, “and because the situation has been so dire for so long, we could see a tremendous amount of upside.”

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Home > News > Risk > Coronavirus - COVID-19 > Actuarial Projections: Virus Might Cause ‘Meaningful’ Increase in Death Rate for Elderly
Coronavirus - COVID-19

Actuarial Projections: Virus Might Cause ‘Meaningful’ Increase in Death Rate for Elderly

An extra 300,000 fatalities for seniors could raise the figure to 4.7% by year’s end. 
By Sarah Min


Since March, pension actuaries have been crunching the numbers on the coronavirus impact on mortality rates. Investors are wondering how the “observed” mortality rate, which includes excess deaths above what is typically expected during normal times, may impact defined benefit (DB) plans. 

The consensus on that is still murky, but getting clearer as the calendar year draws to a close, according to a brief from the American Academy of Actuaries. 

The number of deaths from the pandemic thus far has surpassed 200,000 total in the United States. But an additional 300,000 coronavirus-related deaths among seniors could increase the overall death rate to 4.7% for seniors by year’s end, according to a hypothetical scenario drawn up by researchers. 

That would be a “meaningful” increase from the 4.1% death rate figure in 2017, when the percentage rate translated to about 2.1 million seniors dying of a population of roughly 51 million people aged 65 and older in the US at the time, the brief said. 

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If that scenario bears out, pension plans could see a “small” impact on the mortality rate, researchers said, meaning that liabilities for retirees would likely be reduced. The scenario with 300,000 additional deaths would result in a 21.3% population maturity ratio, which is defined as the portion of those aged 65 years and older to those adults over 20 years, versus a 21.4% population maturity ratio in a scenario without the excess tally. 

Broadly speaking, however, researchers specified that excess deaths from the coronavirus are not as likely to impact pension funds as the immediate financial repercussions of the pandemic, which have hurt the budgets of plan sponsors, as well as their workers, who have been furloughed or laid off. 

Even if normal annual mortality rates were to double in 2020, pension fund obligations are not likely to be reduced by more than 1%. Deaths in the latter part of the year may not even be processed until way into next year. 

But actuaries that include factors for plan beneficiaries such as the differences between blue-collar and white-collar workers, income levels, and ZIP codes may wind up with actuary rates that vary greatly from those of other funds. 

For example, plans that cover essential workers, such as grocery store workers or emergency responders, may find their actuary rates more immediately affected. About 10 million Americans are covered under the Pension Benefit Guaranty Corporation (PBGC)’s Multiemployer Insurance Program, according to the agency. 

Other changes are also in store for the assumed future mortality rate, which actuaries are eyeing as they determine whether the coronavirus will be a one-off event, or if it will continue to have financial and health repercussions down the road. Much like the rest of this year, how that turns out remains to be seen. 

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