COVID-19 UPDATE: Pretty soon, the focus will be on "level" of cases not "change" in case trends. Array ( [cookie] => c489a5-10821b-b587e6-c49e3e-e9789f [current_usage] => 2 [max_usage] => 2 [current_usage_crypto] => 1 [max_usage_crypto] => 1 [lock] => 1 [message] => [error] => [active_member] => 1 [subscriber] => 0 [role] => fsi_macro [visitor_id] => 592986 [reason] => [method] => ) 1
Click HERE to access the FSInsight COVID-19 Daily Chartbook.
STRATEGY: Markets not convinced economy regaining footing...
This has been a very good week for US COVID-19 case data. After all, trends this week cement that the trend is downwards for organic case growth. But we also think that markets will start to shift their thinking about COVID-19 from "change in cases" to "level of cases." That is, we will start to focus more on the question of "when is COVID-19 under control" in the US.
The benchmark many cite is a positivity rate <10%, but the current rate is 6.5% and it doesn't seem like COVID-19 is under control. We think a better measure is to look at daily cases per 1mm residents -- it is currently ~120 per 1mm (40,000 per day). Europe did not open until daily cases 30-50 per 1mm, which in the US equivalent is 9,900 to 16,500.
- so cases need to fall another 60% from here --> at this pace of change, we could be there in a few weeks
- only 10 states have <50 cases per 1mm and only 4 <30 per 1mm (NY, VT, ME, NH)
- only 21% of counties have <50 cases per 1mm, or 1/5 of the US has COVID-19 under control.
So the US has a ways to go. But the interesting thing is the cases are falling so rapidly, we could see these levels in a few weeks.
The quilt below shows the trailing performance (7D relative to S&P 500) of 4 cohorts driving the S&P 500:
- FANG
- Growth
- Defensives
- Epicenter
And as you can see below, the last 3 days have been dominated by the relative outperformance of FANG. And the outperformance of the "epicenter" stocks was a 6-day story, 8/7 to 8/14. This was shorter than the 10-day outperformance in May timeframe.
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