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COVID-19 Outbreak To Peak as Mitigation Weighs

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As the rate of COVID-19 fatalities appears to near a peak in North America, and markets continue their volatility, Brian Belski, Chief Investment Strategist at BMO Capital Markets, moderated a roundtable discussion with BMO experts to discuss the latest developments in the outbreak. Joining him on the call were George Farmer, Biotechnology Analyst, BMO Capital Markets, and Michael Gregory, Deputy Chief Economist at BMO Capital Markets. Special guest Dr. John Whyte, Chief Medical Officer of WebMD, joined the call to discuss the week’s most recent medical developments.                                                                                                    

Dr. Whyte opened the call by saying measures to mitigate the spread of COVID-19 appear to be working, with forecasts that Canada and the United States will likely see fatality rates peak over the next two weeks.

“Both Canada and the United States have talked about how the next two weeks may be a time period where we see the highest number of deaths per day,” Dr. Whyte said on BMO’s fourth consecutive weekly call on the subject of COVID-19 and its impact in North America and the world.

Hitting a peak, Dr. Whyte explained, is important because it is an indication that mitigation strategies have had an effect, and because it provides a road map for further potential mitigation measures.

“Once we have a peak we can look to some potential changes in our mitigation strategy,” he said, pointing at a new recommendation on Friday from the US Center for Disease Control for “facial covering” to prevent the asymptomatic spread of the disease, believed to be responsible for as much as 25 percent of transmission.

At the time of the call, there had been 1.289 million cases of COVID-19 infection reported globally, with some 70,000 deaths.
In the United States, with more than 1.8 million tests completed to date, there have been over 337,000 reported cases, with over 9,000 deaths. Most of the fatalities have been in New York State, followed by New Jersey, New Orleans and Cook County.

In Canada, there were 15,496 cases with 280 deaths, with most of those in the provinces of British Columbia, Quebec and Ontario. It is projected that the overall mortality rate for COVID-19 in Canada will be 0.66 percent, higher than the average flu mortality rate of 0.1 percent, but lower than initially feared.

Number of COVID-19 Cases in Canada
Number of COVID-19 Cases in Canada

Testing and Technology

More and improved testing, coupled with tracking technology, should help to further flatten the curve of infection, Dr. Whyte said.

“We’re having new testing strategies, both diagnostic and antibodies, which are going to have a big impact on improved surveillance and ultimately to returning to some sense of normal,” he said.

The CDC also authorized a new blood test for coronavirus antibodies last week that involves a finger-prick, as opposed to a nasal or throat swab. The new test can show whether a patient has been exposed to the virus and has some immunity, and is potentially able to return to work sooner.

Tests are also becoming faster. Dr. Whyte said antibody tests can now provide results within minutes and will be key to further understanding about how the disease is spreading and how to best curb the outbreak. When paired with tracking technology like the use of smartphones to understand where people have been and whether they have spread the disease or been exposed to it, such testing becomes a powerful mitigation tool.

Bringing rapid testing to scale, both on the diagnostic and antibody sides, will further help healthcare systems to tailor mitigation and treatment strategies going forward.

Antivirals, Supportive Care Treatments and Vaccines

BMO Capital Markets Biotechnology Analyst George Farmer outlined three categories of therapies that are currently in development for COVID-19: antiviral treatments, supportive care treatments, and vaccines. Many of these treatments are or will soon be available for so-called compassionate use for medical professionals before they are available to the general public, Farmer said.

On the antiviral front, “specifically, we’re very intrigued with the potential of Gilead's remdesivir,” he said, “which is undergoing Phase 3 development, as well as other clinical trials where it's being evaluated.” Remdesivir is designed specifically to interfere with viral replication, something that’s been used successfully in HIV therapies.

Regarding the use of hydroxychloroquine as a potential therapeutic drug for COVID-19, Farmer said supporting data is still spotty. He said data is still preliminary after four clinical trials that signal some activity, but are not yet sufficiently robust to be conclusive.

“It's very important not to prescribe the wrong drug for the wrong patient,” he said, “because that can be fatal, especially with a drug like hydroxychloroquine which has been proven to be quite safe overall, but we just don't know how this drug is ultimately going to behave in COVID-19 patients.”

Farmer underscored how important it is to continue to test drugs that show promise in controlled randomized studies to confirm their efficacy.

Another treatment showing some promise is the transfer of plasma from recovered severe COVID-19 patients to those in critical care. “This is basically transferring, if you will, the immune system from one patient to the next,” Farmer explained.

In terms of supportive care, Farmer pointed at Actemra from Roche and Kevzara from Regeneron and Sanofi as two FDA-approved anti-inflammatories that show promise. He said there is early data that suggests these drugs could work as treatments.

On the vaccine front, there are a number of areas of interest, including an RNA vaccine that Moderna is developing and testing. The drug is made of genetic material that forces the patient’s body, when injected, to make its own antigens. It has been successful in pre-trials for a related coronavirus, MERS, and Moderna has indicated that it could be available for compassionate use for healthcare workers in the fall and for the general population by next summer.

United States as of April 6 at 3:30 pm 

United States as of April 6 at 3:30 pm 

Devastating Economic Impact

On the economic front, BMO Capital Markets Deputy Chief Economist Michael Gregory said jobless figures in Canada and the United States are painting a stark picture.

In the United States, Gregory said the unemployment rate has moved from 3.5 percent to 4.4 percent and the underemployment rate went from 7 percent to 8.7 percent, and those figures don’t include data from the most recent weeks, which saw big jumps in unemployment insurance claims.

“The previous high for the jobless rate in the US was in December 1982, at 10.8% and we judge that we are going to be topping that one,” Gregory said.

In Canada, the latest employment report is due on Thursday and the numbers should be relatively worse capturing a slightly longer period of job decline and employment insurance claims. The unemployment rate should climb from 5.6 percent to 8.5 percent in March and while the previous record was also in December 1982 at 13.1 percent, Gregory said, “We’ll be taking a run at it".

He noted that accurate forecasting is difficult because we don’t yet know how long the virus will last.

The New “New Deal”

Gregory compared fiscal stimulus taking place in the United States - particularly amid proposals to increase infrastructure spending - to the New Deal of the 1930s. “It's interesting that we're sort of pulling out a policy prescription from literally the worst economy we've had since the Great Depression,” he said.

He noted that Canada and the United States have similar levels of stimulus, relatively speaking: the US at about 11 percent GDP and with recent measures announced by the federal government, Canada at 10.9 percent GDP.

Reasons for Market Optimism

Turning to the markets, BMO Capital Markets Chief Investment Strategist Brian Belski said some optimism is emerging as North America eyes a potential peak in the rate of mortality from COVID-19.

“If you've been listening to these calls over the last four weeks, Dr. Whyte has been very consistent in his calls for timing of the peak, and it appears now that actually we're seeing anecdotal and real evidence of that occurring,” Belski said. 

As a result, he said, BMO’s investment strategy team believes that the recovery in both US and Canadian stocks, when it occurs, will be as unprecedented as the bear markets that each have endured in the face of the coronavirus.

“We believe that we will see an unprecedented recovery, now it's just a matter of how and when the recovery takes shape, and what the habits of investors are going to be from that,” Belski said.

In the United States, sectors such as communications services, technology and parts of consumer discretionary will be the leading sectors over the next 12 to 18 months, Belski predicted. In Canada, he pointed to communication services, financials and parts of the energy sector as winners as oil prices recover on the back of output agreements between United States, Saudi Arabia and Russia.

“We still believe that North American equities are the place to be with respect to performance of earnings, earnings stability and operating performance - things like return on assets and return on equity – which are much more stable and much more discernible in the United States and Canada, relative to the rest of the world.”


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Brian Belski Chief Investment Strategist
Michael Gregory, CFA Deputy Chief Economist and Managing Director

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