The first wave lockdown versus no lockdown conclusion

Sweden versus England and versus the Netherlands

In week 20 (15th of May 2020) in the Netherlands the weekly number of deaths fell below the average weekly death rate of 2919 based on 2019 numbers for the first time since week 1 (third of January 2020), but week 1 was calculated by CBS with only 5 days so basically in week 20 in the Netherlands the weekly death rate dropped below the average weekly death rate of 2019 for the first time this year. The first wave in the Netherlands lasted from about week 13 (27th of March 2020) to maximum week 20. Let’s say the first wave lasted about 8 weeks or about 2 months in the Netherlands.

In week 22 (29th of May 2020) in Sweden and England the weekly number of deaths fell below the average weekly death rate of 2019 for the first time this year as well. To see the excess death number normalise like that is a clear sign that the Coronavirus first wave in Sweden and England is finished now as well. In both Sweden and England the first wave lasted from about week 13 (27th of March 2020) to maximum week 22. So let’s say the first wave lasted about 10 weeks in both England and Sweden.

In all three countries the above data fits in with the theory that the Coronavirus stops being a deathly problem after it runs its course in a society for a maximum of three months after which the Coronavirus has run out of easy victims and more awareness and more immunity and better measures stop the Coronavirus first wave.

Using data from the Dutch CBS website for the period week 13-week 24 The Netherlands had about 42621 people that died in this period. Using the average weekly death rate of 2919 per week based on CBS 2019 numbers about 35028 of those deaths could have been predicted. The number of people taken before their time by the Coronavirus in the Netherlands was about 7593 in this period. The perceptual difference (higher than normal excess deaths) was about 21.68%.

Using data from the UK ons.gov website for the period week 13-week 24 England had about 178372 people that died in this period. Using the average weekly death rate of 10139 per week based on ONS 2019 numbers about 121668 of those deaths could have been predicted. The number of people taken before their time by the Coronavirus in the UK was about 56704 in this period. The perceptual difference (higher than normal excess deaths) was about 46.61%.

Using data from the Swedish SCB website for the period week 13-week 24 Sweden had about 25132 people that died in this period. Using the average weekly death rate of 1712 per week based on SCB 2019 numbers about 20538 of those deaths could have been predicted. The number of people taken before their time by the Coronavirus in Sweden was about 4594 in this period. The perceptual difference (higher than normal excess deaths) was about 22.37%.

So sadly all three countries had a bad Coronavirus first wave. The doom and gloom stories and finger pointing at your neighbour country on how Swedish had the worst approach in the world by not having a lockdown was simply not true. Using the data from above The Netherlands came out marginally ahead of Sweden at the first place. Sweden came out in the second place and England picked up the third and last place.

Economically speaking England and The Netherlands enforced a lockdown which no doubt will do long lasting permanent economic damage. This self inflicted damage will especially hurt the domestically oriented companies on their stock exchange. At least England and Sweden have currencies of their own to act as stabilisers during the recession. The Netherlands is locked into Euro currency and will have to do without that stabilising factor. One would have expected investors to have hidden in the Swedish stock market so far year-to-date compared to England and The Netherlands stock markets.

George Orwell said; “All animals are equal, but some animals are more equal than others”.

It has been said during the Coronavirus crisis that “we are all in this together”. It is probably more true to say that “all people are equal, but some people suffer more than others in the Coronavirus”. Especially the poor will sadly pick up the tab for this Coronavirus.

The Swedish stock market as represented by the OMX Stockholm 30 index (OMXS30) is down about 8% year-to-date in $. The Dutch stock market as represented by the AEX index (AEX) is down about the same. The UK stock market as represented by the FTSE 100 index (UKX) is down 18%. The Swedish stock market is trading around the 200 day moving average. Again the same can be said for the Dutch stock exchange. The UK stock market is trading just above the 50 day moving average and below the 200 day moving average by about 10%.

It seems the worst excess death percentage the country had the worse its stock market performance has been year-to-date. The correlation is quite remarkable. What might this mean going forward?

If you believe the Coronavirus is not a problem anymore in Europe and there will be no second wave, earnings in 2021 should be getting quite close to the 2019 earnings again. Bull markets climb a wall of worry and there are still plenty of worries around. Some stocks have not really recovered much of the lost ground year-to-date at all. These looser stocks are likely under owned and when Europe comes officially out of the recession there may well be a toxic waste rally where the looser stocks beat the indexes by a mile. Tech stocks and defensive stocks are likely now very overcrowded and can be expected to under-perform the indexes by a mile in such a scenario. In this scenario normally the UK stock market would beat the Swedish and Dutch stock markets as well, but the year-end Brexit deadline will likely spoil this party.

If you believe the Coronavirus will cause more excess deaths going forward in Europe in say a second wave, one can expect more of the same as has happened year-to-date so far. Countries with less excess deaths going forward can be expected to outperform countries with more excess deaths going forward. Tech and defensive will continue to outperform in a second wave scenario.

Still if lockdowns are not re-instated the worst economic data should already be behind us in Europe and comparisons should slowly but surely start to look better. That should help the V shape recovery and very slowly but very surely push stock markets back towards 2019 levels going forward.

Here’s to hoping for better times.