COVID-19 UPDATE: Florida announces re-open plans (5/4) -> 22 states = 38% GDP. Lessons from GFC -> Discretionary EBIT = ATH with 11% lower sales

COVID-19 remains a global crisis and we realize that many people need to keep up with COVID-19 developments, particularly since we are moving into the more critical stage ("restart economy"), so feel free to share our commentary to anyone who has interest.


There were three notable positive developments on the COVID-19 front today.  The biggest is the Phase 3 trial of Gilead's remdesivir, a government-funded study, found that patients who took remdesivir recovered faster than patients who did not from an average of 15 to 11 days. The improvements were so notable that the study was ended early and according to the NY Times, the FDA plans to announce an emergency-use authorization for remdesivir.  Ultimately, when effective treatments are developed for COVID-19, this will become another treatable ailment.  Thus, clearly a positive on the treatment front = reduce seriousness of COVID-19 = reduced consumer fear = re-open economy faster.  

Also, NY Governor Cuomo accelerated further the re-start of NY state.  He announced today several NY counties, all of them upstate, will be permitted to resume elective surgeries, but only if they can keep 30% of their hospital beds and ICU beds free.  And Florida announced plans to re-open in phases beginning 5/4, making it 22 states = 38% GDP on track to re-open.

In all, it looks like the US continues to see positive steps forward in mitigating this pandemic tragedy, and at a pace that seems faster than many expected even a week ago. The fact that 22 states may be open within the next 10 days is tremendous progress.

The S&P 500 gained about 3% today, totaling 8% gains in the past week.  We have remained in the camp that the market shifted into the hands of buyers since 3/23 ("half full") and given the cautious positioning of investors, stocks have been steadily gaining.  There remains so much uncertainty that one cannot reasonably make "bold" or "high conviction" statements.  But in financial markets, uncertainty leads to cautious positioning = same as being bearish.  And as "uncertainty" abates, if the incremental shift is positive, this is a shift in positioning to "buyer hands." If an adverse development, a cautious position remains the same. 

This is the framework we have been using and it does hint at the asymmetry of risk/reward -- positive developments lead to buying.  One thing to be mindful of is that companies are not sitting still.  During this pandemic, they are assessing all their processes and cost structures and likely preparing for a slow recovery.  This is what happened during the GFC (great recession 2008) and this resulted in enormous operating leverage.

Consumer Discretionary saw EBIT recover to all-time highs by 1Q2010 (+10% higher actually) with 11% less sales.  Homebuilders, the epicenter of that crisis, saw EBIT at ATH with a 69% reduction in revenues (see below).  So, there can monstrous operating leverage. In fact, this is another reason to look at the "epicenter" stocks (Consumer Discretionary) because of the potential to dramatically re-engineer costs.  For instance, Discretionary employee expense is est. at 32% of all cash costs, the highest of any sector in the S&P 500. 


POINT #1: USA cases 25,856 (27% off highs) but US reports deaths 2,609, still not from all-time high of 2,685
Our data scientist, tireless Ken, aggregates USA case data by combining information from COVID-19 tracking project, Johns Hopkins and his scraping from the various state dept of health websites.  So, our figures do not always match what COVID-19 or Johns Hopkins reports.

USA case count creeping up slightly but still well off 35,512 highs from 4/25/2020...
The USA case count crept up today to 25,856 which is up from yesterday.  This entire rise is attributable to NY state, which reported +1,475 increase in cases from 3,110 to 4,585.  The US case numbers will fluctuate for several reasons including: each region has its own curve, testing numbers vary by day and delayed reporting causes increases.

- since NY state is accounting for this rise, this does not represent a new breakout.  And given Gov Cuomo is even allowing upstate NY hospitals to perform elective surgery, it does not look like the state believes the rise in daily cases represents a change in trend.


checkout-thomas-lee image
checkout-logo image

Become a Member To Access FS Insight Research

FS Insight gives individual investors access to Tom Lee's research, previously only available to banks and hedge funds.

Monthly

$199/mo

Includes 30-Day Free Trial

Join Now

Annual

$2,388 $2,028/yr

Savings: $360

Join Now

What's included in your FSI Membership?

tom lee iamge

Thomas J. Lee

Head of Research

Type Publication Mon Tue Wed Thu Fri Monthly
Reports First Word
The best market research out there -- on a near-daily basis.
Intraday Alerts
These are released periodically after crucial market developments.
Real-Time
Weekly Roadmap
Weekly summary of market events and updates on our key theses.
Webinars & Videos Macro Minute Video
Daily video commentary on market conditions & key events.
Outlook Webinars
We host over 12 LIVE webinars per year with our research team and high-profile special guests. Incredible value and market insights!
Yearly
Granny Shots Webinars
CEO Interview Webinars Quarterly
Appearances Archive Real-Time
Allocation Tools "Super Granny" Shots Stock List
Granny Shots we expect to tactically outperform and underperform.
Granny Shots Stock List
Thematic investment stock picks that aim to outperform the S&P 500.
Sector Allocation
A sector allocation strategy that is designed to outperform the S&P 500 while taking minimal risk.
Market Alerts ⚡️FlashInsights
Real-time market commentary about macro and crypto events from our research heads.
Real-Time
tom lee iamge

Mark L. Newton

Head of Technical Strategy

Type Publication Mon Tue Wed Thu Fri Monthly
Reports Daily Technical Strategy
Daily commentary on market trends and short term opportunities.
Weekly Roadmap
Weekly summary of market events and updates on our key theses.
Webinars & Videos Daily Technical Strategy
Daily commentary on market trends and short term opportunities.
Live Technical Analysis
Outlook Webinars
We host over 12 LIVE webinars per year with our research team and high-profile special guests. Incredible value and market insights!
Yearly
Appearances Archive Real-Time
Allocation Tools Newton's Upticks Stock List
Technically derived, intermediate-term picks of attractive risk/reward opportunities from the S&P 500.
Market Alerts ⚡️FlashInsights
Real-time market commentary about macro and crypto events from our research heads.
tom lee iamge

L. Thomas Block

Washington Policy Strategy

Type Publication Mon Tue Wed Thu Fri Monthly
Reports US Policy
Weekly update on developments in Washington DC and how they may impact Wall Street.
Weekly Roadmap
Weekly summary of market events and updates on our key theses.
Market Alerts ⚡️FlashInsights
Real-time market commentary about macro and crypto events from our research heads.
Real-Time
sean farrell Crypto Team

Sean Farrell & Crypto Team

Type Publication Mon Tue Wed Thu Fri Monthly
Reports Market Update
Stay on top of the crypto markets with macro commentary, technical analysis, and the most relevant news.
Weekly Strategy
Weekly summary of market events and updates on our key theses.
Funding Fridays
Are you looking for investment opportunities in the crypto space? We explore early-stage crypto opportunities in this note about where the smart money is being invested!
Crypto Concepts
We periodically provide in-depth research on the leading protocols, companies, and funds shaping the crypto ecosystem.
Liquid Ventures
A recurring research note focused on delivering unique insights into high-risk investment opportunities within the crypto ecosystem, primarily centered on early-stage or small-cap tokens.
Deep Research
We periodically provide in-depth research on the leading protocols, companies, and funds shaping the crypto ecosystem.
Quarterly
Weekly Roadmap
Weekly summary of market events and updates on our key theses.
Webinars & Videos Outlook Webinars
Ongoing webinars exploring crypto opportunities, in depth research, and exclusive research offerings from our team of analysts and leading cryptocurrency firms.
Yearly
Crypto Comments Daily Technical Strategy
From Bitcoin, Ethereum and Solana to other coins, our Head of Technical Strategy highlights important price movement to help give you an edge.
Allocation Tools Crypto Core Strategy
A powerful tool designed to help crypto investors build a crypto portfolio that outperforms the industry’s king – bitcoin – regardless of market conditions.
Market Alerts ⚡️FlashInsights
Real-time market commentary about macro and crypto events from our research heads.
Real-Time
Crypto Team

FS Insight Research Team

Type Publication Mon Tue Wed Thu Fri Monthly
Reports First to Market
*Earnings Daily
This note provides investors with a myriad of useful metrics to measure the progress of earnings season
Signal From Noise
Highlights timely market themes and sectors with corresponding stocks, cutting through the day-to-day market “noise” for a distinct perspective.
Community Questions
We gather your inquiries and answer them in the most scalable way. Hear directly from our research principals!
FS Insight Academy
Our main goal is to make you a better investor! This series will guide you through key financial concepts and topics in an understandable way.
Webinars & Videos Free Macro Webinars
Live webinars and Q&A with our research team and high-profile industry leaders.
Quarterly
Free Crypto Webinars
Live webinars and Q&A with our research team and high-profile industry leaders.
Quarterly

*Daily reporting during each quarterly earnings season.

More from the author

Disclosures (show)

Sign in to read the report!

We have detected you are an active member!

Ray: 80a3af-34a1ae-37e696-a1190c-19ce21

Want to receive Regular Market Updates to your Inbox?

I am your default error :)

Events

Trending tickers in our research