COVID-19 UPDATE: Latest Gordon Haskett survey shows an abrupt rise in Consumer willingness to fly and cruise. More signs of "V" in BofA credit card data



It was quite a reversal in equity markets today.  On Sunday evening, futures fell 100 points to 2,950, building upon 5 days of weakness and it looked like Monday's session was going to be bloody. At the open, S&P 500 fell to 2,966, or >8% off recent highs and then rallied +100 points to close up ~1% to 3,067. Here is why this reversal is so telling.  More specifically, the shallowness of this sell-off is telling.  

Equity markets have rallied relentlessly, up ~45% from 3/23/2020 lows and are currently overbought (which is never a tactical sell signal), and given the widely held view that stocks are disconnected from fundamentals, and many investors see this as a "retail investor suckers rally."  Shouldn't this sell-off be gaining momentum?  But instead, equities only retraced 250 points (Sunday evening futures) or 25% of the 1,000 point rally before reversing.

In our view, this reflects how much dry powder is on the sidelines, and how more investors, in our view, are uncomfortably sidelined, rather than uncomfortably long.  After all, after a prodigious rally like this, and the bloody Sunday evening futures trading, Monday should have seen a massacre. 

One thing we noticed in the past week, is growing recognition that the measuring stick for US COVID-19 progress is becoming less about "confirmed cases" (up as testing up) and more about healthcare burden (hospitalization and deaths, both down).  And add to this, there has not been an exponential rise in cases stemming from nationwide BLM movement protests -- sure, confirmed cases are modestly higher (one really needs to squint) but nothing like the superspread events we saw in Italy following the Champions-League event -- 1 case to 2,131 in two weeks.  

I am not sure "masks" explain this -- if every one of the 40,000 fans wore masks at the Champions-League match, do we really think Italy would have not had a pandemic breakout?  The only reason I ask this, is we have not seen a subsequent multi-hundred breakout in any city, town, community in the past 2.5 weeks in the US.  COVID-19 is a very difficult disease to understand and the future is uncertain, but the path of this disease in the US is not fitting the path seen early in 2020.

As for sector leadership, as the last 2 days were ultimately "risk-on" (positive closes), we can see the rebound is led by epicenter stocks.  This is a change.  Investors are not necessarily turning to secular growth/FANG for positive exposure to rising stocks.  It is now the epicenter groups. 


Source: Fundstrat

There are more signs of "Vs" in the US, with the latest BofA credit card data showing their customer credit card spend is flat YoY.  At the worst point, it was down -40% YoY (late March) (see below).  Think about that.  At S&P 500 2,200, there was a devastating collapse in consumer credit card spend.  But this has been entirely recovered since then.  This again shows the strength in stocks is suggesting a vigorous economic rebound is underway.  And more and more incoming data supports this.


The latest Gordon Haskett consumer survey, led by Broadline and Hardlines sector head, Chuck Grom, shows that for the first time, consumers are showing an abruptly increased willingness to travel on a cruise and on a plane, even without a vaccine.  This is the first increase (week #14) in the survey of such willingness.  A fuller discussion is in this commentary below.

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