COVID-19 cases are rising and Tuesday’s 33,213 cases (+6,468 vs 1D ago) is a sizable jump and the 6 states with daily case counts are all reporting increases today and the daily tally is not far from the 4/20/2020 high of 35,754. This is certainly not a positive trend but while cases are near the prior high, daily hospitalizations (gross for the 33 states) is +1,139 (-77%) and daily deaths are 789 (-71%). So, the severity of these incremental cases is not the same as what was seen in April.
This raises many questions but the most important is the policy direction. Given the surge in COVID-19 cases, states and the US need to mitigate transmission — aka, course correction. Below is an ad-hoc list of measures:
– Improve contact trace (“vogue” but failing in USA)
– Enforce social distance
– Isolate the vulnerable (Old and those with co-morbidity)
– Require masks (VERY UNPOPULAR)
– Require sanitization measures
– Close rogue establishments
– Monitor waste (fecal testing works, see our prior commentary)
– Close state borders
– Close international borders
– Rollback / Re-close the state (ABSOLUTELY LAST RESORT)
The last resort is likely to reinstate shelter at home. States continue to take enforcement measures. Texas on Tuesday imposed temporary 30-day shutdowns on 17 bars (see comment last week and below). And the best solution, probably, but also the most unpopular, is requiring usage of masks.
Causality is also important. The surge we are seeing aligns much better with the nationwide protests that have been ongoing for 3 weeks. Even in Texas (discussed below), the nucleus of that state’s surge is Houston, accounting for >51% of new cases (22% of the population) and has seen a parabolic blast-off while Dallas, San Antonio and even Austin (lesser extent) have been largely flat. What has been happening in Houston? George Floyd is from the Third Ward in Houston and that ward was the site of the earliest protests. Even OpenTable shows a peculiar surge in reservations in that city (Mr. Floyd’s funeral was this week).
Each of the protests involved tens of thousands of Americans in close proximity for hours, so it represented 10,000X super spreader events, akin to the Champions League even in Northern Italy (which flamed the Italy-Spain pandemic). If the protests are behind this surge, then different mitigation measures are required. In any case, it is important for states to take course correction. So, there is tons of rationale and logic behind Dr. Fauci’s statement to Congress today that “the next few weeks are critical”
https://www.usnews.com/news/health-news/articles/2020-06-23/fauci-to-testify-at-a-fraught-time-for-us-pandemic-response
On the economy side, more signs of a “V” continue to emerge. Below is the latest from Chase credit card spending, which continues to march upwards.
https://twitter.com/SamRo/status/1275441329686769664
And the US Markit PMI rose sharply (although just under 50), showing industrial activity is showing evidence of a V-bounce.
And commodities like Oil and even Lumber have made “V” moves that are potentially even further along than what equities and economic indicators have shown. Lumber bottomed before oil, 4/1 vs 4/20, and is further along in its recovery.
STRATEGY: Rising COVID-19 cases troubling, but stocks still in hands of buyers
The rise in cases is not good. But a few weeks ago, we had flagged the nationwide protest “broke” the COVID-19 timeline. And now that we are here, 3 weeks later, it seems like this is the case. I am not a policymaker, but I don’t see reinstituting “shelter-in-place” as the way forward. Policymakers do need to correct the course.
We still see positive risk/reward in stocks and as we have said for some time, equities are in the hands of buyers (“half full”) and as the chart below shows, the S&P 500 is holding above the 76% retracement level. And if it holds here, “new highs” should be here by the Summer.
If you don’t think that can happen:
– Already happened to NASDAQ today
– NASDAQ is not a divergence, it is a leading indicator
– Our past work on 10 precedent declines >35% show symmetric recoveries (speed fall = speed recovery) and implied new highs in 2020
This happened to NASDAQ, like clockwork. Why wouldn’t it happen to the S&P 500?
By the way, here are 5 points below, which argue why stocks will make new highs this year. Of these points, the last point might be the almighty “ace in the hole” — don’t fight the Fed
Source: Fundstrat.
POINT #1: US cases rising, hospitalizations + deaths “curl upwards” but still not tracking = the rise aligns better with the protests
Daily cases again rose in the US. The rise is across multiple states, and while testing is higher, the synchronized rise across states is the bigger driver. The trend in cases is not good, and at face value, should be alarming. But this surge in cases is not seeing a commensurate surge in hospitalizations and deaths.
– Daily cases at 33,213 is only a tad lower than the prior record 35,754 on 4/24/2020
– Hospitalizations are down >75% since then
– Daily deaths are down >75% since then
In other words, the profile of the new cases is not necessarily leading to a surge in healthcare severity. The risk, obviously, is that this could be lagging. And if this is the framework, this makes hospitalizations and deaths the more important metrics.
Source: COVID-19 Tracking Project
Total daily new cases, compared to a week ago, is +10,037 higher. So, the week over week delta shows the pronounced rise in cases. Mitigating this rise requires course correction by the states. We are seeing this taking place, and Texas on Tuesday (discussed below) also ordered 30-day shutdown for 17 bars for not enforcing social distance rules.
– the nationwide surge, in our view, aligns with the superspreader risks taking place at the >350 nationwide protests involving tens of thousands of Americans
– and the fact that many of the new cases are younger Americans also seems to align with BLM protests (but bar drinking is an important factor as well)
– the younger profile is potentially making each case less of a healthcare burden as well.
Source: COVID-19 Tracking Project
Gross hospitalizations rose today (for the 33 states that report this data) and as this chart below shows, this is a curl upwards from the last few days. But this data can be lumpy, so we need to see how it trends in the next week or so.
Source: COVID-19 Tracking Project
Similarly, daily deaths rose today but it is still well off of its recent peak of 2,759 per day.
Source: COVID-19 Tracking Project
Take a look at the listing of the case changes in the daily cases. The top 6 states (largest daily reported new cases) are seeing higher case counts yesterday vs Monday. Texas is now the state reporting the most daily cases.
Source: COVID-19 Tracking Project
Total daily administered tests have hovered around 500,000 per day in the US. And this figure has been trending higher over time.
Source: COVID-19 Tracking Project
The positivity rate is moving higher as well. It is now 6.5% up from the low of 3.9% and reflects this inching higher in cases. The R0 is certainly >1.0 in the US, as cases are rising. And mitigation steps are needed.
Source: COVID-19 Tracking Project
POINT #2: Houston is 51% new cases in past month (22% pops) suggesting protests behind surge…
Change in Texas daily cases between 5/25/2020 and 6/22/2020…
Texas has become a focal point lately, namely because the state has seen a tremendous surge in cases and is the state reporting the highest number of new cases daily. The general view for this surge has been the early opening of the economy and lax enforcement of mitigation measures.
– The state has been largely open since 5/1/2020, and in the first 5 weeks since opening, cases were essentially flat
– Houston is the source of the surge in cases, accounting for >51% of the rise in new cases since a month ago, and is only 22% of the state population
– What makes Houston unique versus Dallas, Austin and San Antonio? The city is the focal point of the TX BLM protests, as George Floyd is from Houston’s Third Ward
– The first protests in Texas were in the Third Ward, starting 5/26/2020
Source: Johns Hopkins
This again supports our many prior observations showing that the surge in US cases aligns much better with the 2-3 weeks after the ongoing nationwide protests in >350 involving tens of thousands of Americans and in close contact for hours. Again, as we highlight below, the divergence of Houston vs other large cities in Texas certainly supports this. Austin is seeing a smaller surge, but Houston is the focal point.
Texas opened its economy for dining, retail, drive-ins and malls on 5/1/2020…
Texas opened its economy largely on 5/1/2020, including retail, dine-in and malls. So, the state was one of the earliest to move aggressively to open. Gyms and bars opened a bit later, on 5/18 and 5/22, respectively.
Source: State of Texas
Dining reservations from OpenTable began to rise on May 1, and it took a few weeks for the figures to show meaningful improvement. And in the past few weeks, the particular surge in Houston stands out.
– Again, I don’t think Houston had any more liberal opening policies — but the mass gatherings ahead of the Floyd funeral certainly seem to fit the reason the city saw a surge in dining reservations.
Source: OpenTable data
Houston saw a surge in cases 2-3 weeks after the mass weekend protests associated with BLM
We plot the daily COVID-19 cases for the 4 largest counties in Texas — Houston, Dallas, Austin and San Antonio. And we marked the date of opening of the state and the start of the BLM protests.
– In the 3 weeks following the state opening (including dine-in), cases were largely flat
– But in the 2-3 weeks following the BLM protests, we have seen cases explode in Houston
– Dallas and San Antonio have seen a rise, but nothing in the orders of magnitude of Houston.
Source: Johns Hopkins
5/26 –> https://www.fox26houston.com/news/houstonians-gather-to-honor-george-floyd-and-protest-police-brutality
5/29 –> https://www.texastribune.org/2020/05/29/george-floyd-texas-protest-photos-houston-dallas-austin//
If protests have driven the surge in cases, it affects how Texas needs to “course correct”
The point of this is that the state course correction is dependent, to an extent, to the reasons for the case surge. If the ongoing protests are the source of spread, then the state re-opening is a secondary or tertiary factor.
– The state still needs to enforce mitigation measures.
– Mandating masks would be a good option, but we are VERY VERY aware that this is not a popular solution.
– So masks may not be the path that policy makers choose.
But we also think that those watching Texas should not be blaming the opening of the economy for the surge. The state is following through on its prior plans to enforce regulations on bars and impose a 30-day shutdown on those bars which do not comply.
– According to a local TX news site, KSAT.com, the State has already imposed 30 day shutdowns on 17 bars.
https://www.ksat.com/news/local/2020/06/23/san-antonio-bar-temporarily-shut-down-after-violating-covid-19-health-protocols-officials-say/ ‘
Trends in hospitalizations and deaths is not as bad as the daily case trends…
The incremental cases have been younger citizens and as a result, the ratio of cases to hospitalizations and to deaths has been less pronounced. Below is the daily “net admissions” to hospitals in the 4 TSA (trauma service areas) around the 4 major cities noted above. We used the same scale so that one could see the comparisons more clearly:
– Daily cases have surged the most in Houston, and to a lesser extent in San Antonio
– Dallas and Austin have seen net admissions increase, but not nearly at the same pace
Source: Texas Department of State Health Services
And daily reported deaths certainly have not kept pace. As shown below, daily deaths have not been tracking daily cases. In fact, Dallas is showing a pronounced decline. While Houston, San Antonio and Austin are essentially flat.
– we have been told that treatment regimens have improved, so fewer cases are leading to deaths
But this is also a positive development.
Source: Texas Department of State Health Services
POINT #3: COVID-19 dropped to #5 leading cause of death from #1 in April
Over the past week, about 4k Americans have perished from COVID-19. In the US, a death is deemed COVID-19 death if the patient tested positive for the disease, even if there is another factor behind their fatality — i.e., suffering from a chronic or terminal disease, or died of an accident. The US has about 60,000 deaths every week, or about 8,500 per day.
– Of those weekly deaths, COVID-19 now ranks as the #5 killer of Americans
– Cancers, Heart Disease, Alzheimer, and “Other” rank ahead of COVID-19
Source: CDC and COVID-19 Tracking Project
COVID-19 was the #1 cause of death in much of April and early May…
At the height of the crisis, COVID-19 was the leading cause of deaths in the USA. We based this on the weekly deaths data provided by the CDC. And as the quilt below highlights, COVID-19 has been steadily declining in its rank.
Source: CDC and COVID-19 Tracking Project
We have highlighted the COVID-19 share of deaths for AZ, CA, Arkansas, FL, TX, NY and Utah.
– similar to the US, COVID-19 is not the #1 cause of deaths in these states
– AZ is the highest, with 14% of deaths attributable to COVID-19 and #3 overall.
– TX and NY have similar share and rank
But the latest data point is not the singular factor. Trends are not good in Arizona (up) and Arkansas (up) in terms of deaths and share of deaths. But CA, FL, TX and UT and NY as well as seeing improving trends.
Source: COVID-19 Tracking Project and CDC
