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* Monday * Tuesday * Wednesday * SKIP THURSDAY * Friday STRATEGY: POLICYMAKERS "PANIC" WHICH MEANS MARKETS DON'T HAVE TO _CDC reverse indoor mask policy for "vaccinated" Americans = policymakers panic _Before the market open, the CDC issued new guidance on indoor mask policy, recommending fully vaccinated Americans wear a mask indoors in states seeing a surge of cases: - this is pretty logical and my expectation was masks would come back in the Fall (for the Northeast) - To me, this is hardly a reversal of the economic re-opening - it's always good when policymakers panic As we stated in several of our recent notes, the UK saw the Delta COVID-19 surge peak after 45 days. Hence, we think the US is far closer to an apex in this Delta surge than many realize. This is also consistent with the comments made by Dr. Scott Gottlieb. Source: CDC reverses indoor mask policy, saying fully vaccinated people and kids should wear them indoors (cnbc. com) _... EQUITY MARKETS REACTED IMMEDIATELY TO THE CDC HEADLINE, SENDING S&P 500 DOWN 60 POINTS, OR 1.5%_ The CDC headline came out at 8am and the S&P 500 fell 60 points by late morning, or 1%. So the CDC headlines obviously spooked investors, also evidenced by the surge in the VIX. - in our view, when policymakers panic, investors should add "risk" - after all, if policymakers panic, you don't have to - In fact, markets have mostly recovered by late afternoon, as shown below _... USA cases are on track to reach 100,000 next week, but that is close to the peak _In the meantime, daily COVID-19 cases continue to surge, and we believe are on track to exceed 100,000 sometime next week. But as we stated in several recent comments, we think the peak in COVID-19 cases is within the next 12 days or so. _... Delta surge hardly seen in "high vax" US states, based on hospitalizations _Below are the 6 states with the highest vaccination rates. And as shown, while cases are up, one has to squint to see higher hospitalizations: - VT, MA, ME, CT, RI, MD have the highest vaccination rates - range is 58% to 67% of total state being fully vaccinated - hospitalizations have barely moved _... but Delta scourge very evident in 6 "lowest Vax" US states based upon hospitalizations _But look at hospitalizations of the 6 states with the lowest vaccination rates. Yikes. There is a massive surge in hospitalizations: - AL, MS, AR, WY, LA, ID have the lowest vaccination rates - range is 34%-37% of total state fully vaccinated - the contrast in hospitalization rates is utterly stark To me, the takeaway is vaccinations surely seem to be limiting the healthcare severity of Delta variant. And in our view, Delta is more "bark than bite." _... strong case that COVID-19 might be seasonal, and hence, mask mandates will come back seasonally _And to reiterate a point we have made several times during the Delta surge, we think there might be some strong argument that COVID-19 is a seasonal virus. There are reasons for seasonality: - Northeast less sunlight (vitamin D) during Fall/Winter - South is "indoor season" during Summer and this is where surge most evident Thus, the surges in FL, AR, AL etc could also be seen through the lens of seasonality. _STRATEGY: US equity markets are increasingly attractive, amplifying our 2021 view of "supply chain moves to America" _There is no shortage of "wall of worry" at the moment: - Delta surge - Fed behind curve - "peak everything" - China crackdown --> first bitcoin, now everything else But markets climb a wall of worry. As we have stated many times, the risk/reward for stocks is very good for 2021 and our base remains S&P 500 total return in 2021 is +23% or better, implying 2H2021 gains of +9%. _... China peaked in February (sort of when Bitcoin peaked), so the education crackdown is not really "new news" _Below is the relative performance of country indices (vs MSCI all-world) and in two timeframes: - start of year to Feb 10, China markets surged - this is consistent with China escaping COVID-19 - but this peak in Feb also coincided with the Bitcoin peak - China began cracking down on crypto before cracking down on other industries - since February 10th - USA has solidly outperformed the rest of the World - Europe has followed closely So we can see growing relative strength of USA. This is something we have argued for sometime. That the US will outperform for a combination of: - US superior demographics - US wealth transfer - US fiscal policy superior - US vaccination policy superior - US consumer resilient - US leadership in key industries Technology, Financials and Healthcare This still remains a central case. _... And post-pandemic, we see supply chain moving back to USA... more urgent given China crackdown _And we see the supply chain moving back to the US. This is made more urgent given the recent crackdown by China on several private sectors plus Bitcoin (mining and usage). Thus, "buy American" is gaining relative strength. _... markets are still suffering from "chop" but we see positive risk/reward growing _ We were hopeful that the July chop might have ended with the UK delta surge ending. And for the most part, we still expect this to be true. But the China actions have added to the chop near term: - China crackdown creates uncertainty - USA delta surge still not over, but expected within next 12 days - Many investors are on "revenge travel" in July/August, so market depth suffers - Historically, to me, "nobody makes money in July/August" = true in 2021 So, we still remain constructive on markets into YE. And we favor Epicenter stocks. And the risk/reward is most positive in Energy. But at the same time, "July chop" is here and likely ending soon. But this is also a reminder that one cannot be a hero during "chop season" _BE WARY OF "CHOP SEASON"_ POINT 1: DAILY COVID-19 CASES 59,180, UP +25,386 (EX-FL&NE) VS 7D AGO... CURRENT HOSPITALIZATIONS ARE SURGING WHILE DAILY DEATHS REMAIN FLAT... _____________________________ Current Trends -- COVID-19 cases: - Daily cases 59,180 vs 42,782 7D ago, up +16,398 - Daily cases ex-FL&NE 59,180 vs 33,794 7D ago, up +25,386 - 7D positivity rate 6.0% vs 5.2% 7D ago - Hospitalized patients 35,815, up +37% vs 7D ago - Daily deaths 263, up +9.8% vs 7D ago _____________________________ _*** Florida and Nebraska stopped publishing daily COVID stats updates on 6/4 and 6/30, respectively. We switched to use CDC surveillance data as the substitute. However, since CDC surveillance data is subject to a one-to-two day lag, we added a "US ex-FL&NE" in our daily cases and 7D delta sections in order to demonstrate a more comparable COVID development._ The latest COVID daily cases came in at 59,180, up +25,386 (ex-FL&NE). The Daily cases is still steadily rising - 7D delta in daily cases (the speed of case rise) has been gradually rising and now is at ~18,000. The number of hospitalized patients is approaching the level we observed during the "mid-wave" in April. However, the daily deaths remain relatively low. As we noted, US could follow the same pattern as UK and India, and peak in next two to three weeks. In fact, the reintroduction of mask mandate could further cut down the transmission of Delta variant and the case trend in US could roll over even sooner. We will be watching the relevant data closely.   At state level, TN, OK, AL, SC, LA, AR, MA, MS, NC, and VT are the states with the largest increase in daily cases compared to their recent lows (as shown in the "parabolic" tracker below), and all 10 states except NC, MA and VT have less than 50% of their populations vaccinated with at least one dose, and 40% of their population fully vaccinated. This is consistent with what media have been reported regarding the majority of new cases being amongst unvaccinated individuals. Therefore, the COVID developments (both the case and vaccination trends) in these states along with the other low vaccinated states (such as GA, ID, WY, ND, IN) are worth watching. _7D delta in daily cases has been slowly rising, now at ~18,000... _The 7D delta in daily cases has been slowly rising over the past week. A rising 7D delta means the speed of the case rise is increasing. As we noted, if US follows the same pattern as UK/India, the daily cases will continue to rise in next two to three weeks. Based on current speed of case rise, The peak number of daily cases could exceed 150,000. _LOW VACCINATED STATES SEEM TO HAVE A LARGER INCREASE IN DAILY CASES COMPARED TO THEIR RECENT LOW..._ Below, we added a new section called "Parabolic Case Surge Tracker" to monitor the possible parabolic surge in daily case figures. In the table, we included both the vaccine penetration and the recent case trend for 50 US states + DC. The table is sorted by the multiple of their current daily cases divided by their recent low in daily cases. - The states with higher ranks are the states that have seen a more significant rise in daily cases - We also calculated the number of days between now and the recent low date; a state with a high multiple but low number of days since its low means the state is facing a relatively rapid surge in daily cases - The US as a whole, UK, and Israel are also shown at the top as a reference   _CURRENT HOSPITALIZATION AND POSITIVITY RATES ARE RISING... DAILY DEATHS REMAIN FLAT..._ Below we show the aggregate number of patients hospitalized due to COVID, daily mortality associated with COVID, and the daily positivity rate for COVID. As you can see, hospitalization and daily deaths are relatively low compared to the prior waves. However, with the recent increase in daily cases, current hospitalization is clearly turning upwards. Regarding positivity rate, it recently exceeded 5%, which is higher than the positivity rate we observed during the "mini" wave this April and significantly higher than the recent low of <2%. Daily deaths seem to be still flat, but it could reverse if case figures continue to rise. POINT 2: VACCINE: VACCINATION PACE HAS BEEN SLIGHTLY RISING OVER THE PAST FEW DAYS... ____________________________ CURRENT TRENDS -- VACCINATIONS: - avg 0.6 million this past week vs 0.5 million last week - overall, 48.8% fully vaccinated, 56.5% 1-dose+ received _____________________________ VACCINATION FRONTIER UPDATE --> ALL STATES NOW NEAR OR ABOVE 80% COMBINED PENETRATION (VACCINES + INFECTIONS) Below we sorted the states by the combined penetration (vaccinations + infections). The assumption is that a state with higher combined penetration is likely to be closer to herd immunity, and therefore, less likely to see a parabolic surge in daily cases and deaths. Please note that this "combined penetration" metric can be over 100%, as infected people could also be vaccinated (actually recommended by CDC). - Currently, all states are near or above 80% combined penetration - RI, MA, SD, CT, NJ, IL, NY, DE, NM, UT, PA, ND, AZ, MN, CA, FL, NE are now above 100% combined penetration (vaccines + infections). Again, this metric can be over 100%, as infected people could also be vaccinated. But 100% combined penetration does not mean that the entire population within each state is either infected or vaccinated. Below is a diffusion chart that shows the % of US states (based on state population) that have reached the combined penetration >60%/70%/80%/90%. As you can see, all states have reached 60% and 70% combined vaccination + infection. 96.8% of US states (based on state population) have seen combined infection & vaccination >80% and 65.6% of US states have seen combined infection & vaccination >90%.   There were a total of 394,474 doses administered reported on Tuesday. Over the past two weeks, the vaccination pace has been mostly flat, but recently it seems to edge up slowly. Perhaps people are becoming more inclined to get vaccinated over growing delta variant concerns. But this is actually a good sign since vaccination not only could lower the chance and mitigate the severity of getting COVID, but also reduce the virus transmission. Currently, 2/3 of the US population eligible (age 12+) to receive COVID vaccines have already received at least one dose. For some people among the remaining 1/3, vaccine hesitancy concerns might not easily be reversed. But in order to prevent another parabolic surge in daily cases, hospitalizations, and fatalities, getting more people fully vaccinated remains the key.   _99.1% of the US has seen 1-dose penetration >40%... _ To better illustrate the actual footprint of the US vaccination effort, we have a time series showing the percent of the US with at least 45%/45%/50% of its residents fully vaccinated, displayed as the orange line on the chart. Currently, 87.3% of US states have seen 40% of their residents fully vaccinated. However, when looking at the percentage of the US with at least 45% of its residents fully vaccinated, this figure is 66.9%. And only 44.5% of US (by state population) have seen 50% of its residents fully vaccinated. - While 99.1% of US states have seen vaccine penetration >40%, 93.4% of them have seen 1 dose penetration >45% and 78.1% of them have seen 1 dose penetration > 50%. - 87.3% of the US has at least 40% of its residents fully vaccinated, However, only 66.9% of US has fully vaccinated >45% and 44.5% of US has fully vaccinated >50%. This is the state by state data below, showing information for individuals with one dose and two doses. The ratio of vaccinations/ daily confirmed cases has been falling significantly (red line is 7D moving avg). Both the surge in daily cases and decrease in daily vaccines administered contributed to this. - the 7D moving average is about ~15 for the past few days - this means 15 vaccines dosed for every 1 confirmed case In total, 341 million vaccine doses have been administered across the country. Specifically, 187 million Americans (56% of US population) have received at least 1 dose of the vaccine. And 162 million Americans (49% of US population) are fully vaccinated.     POINT 3: Tracking restrictions lifting and subsequent effects in individual states Point #3 focuses primarily on tracking the lifting of restrictions, as states have eased the majority of mandates. Keep in mind, easing/lifting restrictions are contingent upon state of emergency ordinances being renewed. - States in groups 1 and 2 represent states that let their emergency ordinances expire, or that never had one in the first place - Note: IL and HI are not listed. This is because restrictions lifting is determined at the county / island level, and no statewide policy will be established to lift restrictions until a full reopening So there is a spectrum of approaches. Our team is listing 3 tiers of states and these are shown below. - states that eased all restrictions in 2020: AK, OK, MO, FL, TN - states that have eased all restrictions in 2021 to now: ND, SD, NE, ID, IA, MT, MS, AZ, SC, WY, TX, GA, AR, KS, WI, IN, AL, UT, NH, LA, NJ, KY, MN, MA, VT, OH, WV, ME, MI, NY, OR, PA, MD, DE - states that are still easing restrictions in 2021: WA, NC, CA, NM, CO, NV, CT, VA, RI, DC GROUP 1: STATES THAT LIFTED RESTRICTIONS IN 2020... The daily case trends in these states are impressive and it is difficult to say that lifting restrictions has actually caused a new wave of cases because the case trends in these states look like other states. GROUP 2: STATES THAT HAVE LIFTED RESTRICTIONS IN 2021 TO NOW... Similar to the list of states above, the daily case trends in these states are impressive and it seems that lifting restrictions hasn’t caused an increase in cases. GROUP 3: STATES THAT ARE STILL EASING RESTRICTIONS IN 2021... These states have begun to lift restrictions, but have yet to ease all restrictions. The date of each state’s most recent restrictions lifting is indicated on each chart. The case trends in these states have been mostly positive. - Easing restrictions appears to have contributed to an increase in cases in several of these states, most drastically in OR, ME, WA, and MN

CDC predictably brings back mask mandate --> policymakers panic so you don't have to...
  • First Word
Nov 19, 2020

COVID-19 UPDATE: Hmmm... looking more like cases could rolling over in TX, IL and WI...10 reasons S&P 500 P/E expands into YE --> thus, raising YE Target to 3,800 (vs 3,525 prior).

Please join us for an exclusive virtual conference as the leading strategists at FSInisght provide their insights into where the markets are headed and how to position your portfolio in a post-election world. DETAILS AND SPECIFICS Date: Thursday, November 19th, 2020 Time: 3:00PM - 6:00PM Eastern Time Link -->  RESERVE YOUR SEAT VIA THIS LINK Should you have any questions, please do not hesitate to leave us a message or email us at inquiry@fsinsight. com. _________________________________ STRATEGY: STOCKS ARE STILL A GOOD RISK/REWARD INTO YE, AS P/E HAS TAILWINDS We do not want to be "jumping the gun" but it does look more and more like COVID-19 wave 3 could be slowing.  Take a look at the chart below: - the 7D delta in daily cases has slowed markedly from >43,000 to <20,000 - and daily cases in TX, IL and WI look to be rolling over (see Point #2) - is wave 3 peaking in the next few weeks? - this is way ahead of our base case of flu season lasting until mid-Feb COVID-19 is unpredictable.  So daily cases might be slowing in wave 3 states, but it could erupt in the Northeast.  So it might be more accurate to say daily cases seem to be rolling over in TX, WI, IL and leave it at that.  We wrote about El Paso and TX yesterday.  But it seems like it is more states now. Source: COVID-19 Tracking and Fundstrat   Given the fierce move by equities in the past few weeks, it is not entirely surprising to see stocks consolidate over the last few days.  And not surprisingly, there are more than a few who believe markets have become overly exuberant.  To an extent, we understand this, as there has been both a sizable move in markets coupled with a sizable rotation into epicenter stocks. That said, we see tailwinds for P/E into year-end, and while upside to earnings revisions is muted for now (we are done with 3Q2020 EPS), we believe risk premia can fall = P/E expansion.  Below are 10 reasons we see this: 1.  COVID-19 vaccine and therapeutics take “worst case” off table.  2.  Policymakers are pursuing soft-lockdowns, not killing recovery 3.  Pent-up demand in US, look at output gap 4.  China seeing massive explosive economic recovery 5.  Fiscal stimulus coming 6.  Investors are cautiously positioned, with little conviction 7.  $4.5T cash on sidelines 8.  If VIX breaks below 20, double-risk on signal 9.  Santa Claus rally 10. Fed dovish _WE SEE S&P 500 REACHING 3,800 BY YEAR-END (VS 3.525 PRIOR) AS P/E EXPANDS BY 1.4X TO 19.7X_ With tailwinds for P/E expansion, we see 2021 P/E rising to 19.7X from 18.3X, which would lead to S&P 500 3,800 (based on EPS of $193).  This, we are revising our YE target from 3,525 (which we raised on 8/13) and represents about 6.5% upside. - this is about the magnitude of a typical Santa Claus rally - so we are saying markets see their typical seasonal gains. Source: Fundstrat _S&P 500 P/E OF 19.7X IS THE SAME AS HIGH-YIELD IMPLIED P/E TODAY... SO IT IS NOT "DEMANDING"_ From a valuation perspective, the target P/E of 19.7X is the same as the high-yield implied P/E (inverse of yield to worst) of 20.6X.    - in fact, it is a discount - if S&P 500 traded at 20.6X, the S&P 500 would be 3,976 _EPICENTER STOCKS RALLY STILL WEAKER THAN THE POST-WAVE 1 RALLY..._ We have written multiple commentaries about the tailwinds for epicenter stocks, and in particular, how they are the most leveraged to both: - vaccine/therapeutics --> demand recovery - economic recovery --> operating leverage via cost cutting Thus, we see the best risk/reward in the epicenter.  And unlike earlier in 2020, there is much greater visibility and tangibility to a vaccine and cure for COVID-19.  Thus, the ability for markets to look beyond contemporaneous cases should be much higher.  As shown below, post-Wave 1, Epicenter stocks rallied 1,900bp relative to the S&P 500.  And the rally was weaker post-Wave 2. - So far, Epicenter has outperformed by 1,420bp.   - This is a fraction of the 7,000bp of YTD outperformance of Growth - Thus, we see substantial upside for epicenter stocks. Source: Fundstrat _ADDENDUM: WE ARE ATTACHING THE STOCK LISTS FOR OUR 3 PORTFOLIOS:_ _We get several requests to give the updated list for our stock portfolios.  We are including the links here:_ _- Granny Shots  -->       core stocks, based on 6 thematic/tactical portfolios_ _- Trifecta epicenter  --> based on the convergence of Quant (tireless Ken), Rauscher (Global strategy), Sluymer (Technicals)_ - Biden vs Trump  -->   based on correlation to either candidate odds Granny Shots: Full stock list here --> CLICK HERE Trifecta Epicenter: Full stock list here --> CLICK HERE Biden White House vs. Trump White House: Full stock list here --> CLICK HERE POINT 1: Daily cases 160,466, +19,492 vs 7D ago -- the lowest 7D delta in two weeks The latest COVID-19 daily cases came in at 160,466, up +19,492 vs 7D ago. Wave 3 is still surging. - But oddly, are cases starting to decelerate on a "rate of change" basis? - maybe Source: COVID-19 Tracking Project  and Fundstrat _7D DELTA AT 19,492 IS THE LOWEST IN NEARLY 3 WEEKS..._ Again, the daily change vs 7D ago, in our view, is the leading indicator as it is what influences the 7D moving average. - Daily cases are rising vs 7D ago, - It had been rising at >40,000 7D delta - But the pace slowed to <20,000 on Wednesday Source: COVID-19 Tracking and Fundstrat   Source: COVID-19 Tracking and Fundstrat   Source: COVID-19 Tracking and Fundstrat POINT 2: If Wave 3 is peaking, early signs in WI, IL and TX Yesterday, we wrote about how it looks like parts of Texas were seeing a peak in cases.  And below are the major states involved by their respective waves.  If wave 3 is peaking, we believe it is potentially starting in 3 states: - IL --> seems rolling over - TX --> we wrote yesterday about El Paso - WI --> squint... looks like it is rolling over Source: COVID-19 Tracking Project and Fundstrat This is the chart showing daily cases per 1mm in the 6 largest counties in Texas.  And El Paso stands out because it looks like cases are finally rolling over. Source: Johns Hopkins and Fundstrat Again, looking at Illinois, it does look like this surge associated with Wave 3 could be plateauing... that is a good sign. Source: Johns Hopkins and Fundstrat  And again, I might say that Wisconsin also looks like daily cases are starting to roll over... Source: Johns Hopkins and Fundstrat   POINT 3: Age 60+ is now the largest share of new cases, a bad sign for future mortality The CDC provides data on demographic trends in COVID-19. The data is somewhat lagged, due to reported delays and the latest update is as of 11/3/2020, or about two weeks ago.  But the extracted data, particularly around the share of cases, is still relevant.   Below shows the share of cases  (trailing 30D) based on age groups.  This is important because we know of the sizable variances in mortality risk (case fatality rate) between age groups: - Wave 1, ~35% of cases were age 60+ which explains the extremely high mortality rates - Wave 2, the plurality of cases were age 20-29 - Wave 3, so far, age 60+ is now the largest share of cases at ~21% This wave is underway, but this also suggests that death rates could exceed that of Wave 2, simply because of the higher share of older Americans. source: https://data. cdc. gov/Case-Surveillance/COVID-19-Case-Surveillance-Public-Use-Data/vbim-akqf This chart below shows the case fatality rate by age, based on data from Our World in Data.  And as shown, there is a sharp rise in mortality based on age. https://ourworldindata. org/mortality-risk-covid For the US specifically, Statista has this data, collected from the CDC and also shows considerably higher mortality for older Americans. - in round numbers, if wave 2 was primarily 20-29, the mortality rate (case fatality rate) was 0.1% but age 60+, this jumps to 2.7% or higher - thus, mortality risk remains high unless the standard of the case has improved https://www. statista. com/chart/21173/hospitalization-icu-admission-and-fatality-rates-for-reported-coronavirus-cases/ RANDOM: Chart shows Wave 3 surge is similar to US corn production -- someone called it "cornvirus" I wanted to share this tweet from @EthicalSkeptic.  This account often comments on COVID-19 with sometimes interesting facets of the pandemic.  But this tweet below caught my eye. - @ethicalskeptic points out that corn production in the US looks similar to wave 3 of COVID-19 - I especially found "cornvirus" to be funny Source: twitter. com The two images below make it clearer.  I have no idea why these two charts look so similar.  If you have a view, please let me know Source: twitter. com

The fact UK Delta surge lasted 45 days remains important "break point" but we expect investors to remain wary

And any "hot readings" of incoming economic data and inflationary signals are tempered by the macro risks posed by the Delta variant, and future mutations of COVID-19. Therefore, we think the probabilities favor the Fed erring on the side of accommodation/dovishness. This is obviously not a radical observation. But nevertheless, highlights that the delta variant is creating and underlying support for risk assets. _... India delta surge lasted about 50 days, UK surge lasted 45 days _We think one of the most important developments in the past few weeks is the fact that the UK saw Delta COVID-19 surge peak after 45 days -- this while the UK did not impose any new restrictive measures. - while this may not be the US experience (could US surge last longer)? - the fact that Delta ran its course after 45 days is key - UK vaccine penetration is similar to the US Interestingly, the Delta surge in India also lasted about 50 days. This is what is interesting: - Delta is highly contagious with R0 of >9 - Viral load is 1,000X other variants - Higher R0 might also mean Delta runs its course sooner (exhausting host bodies) As a point of perspective, this suggests to me that Delta will perhaps run its course faster than many expect. In fact, Dr. Scott Gottlieb has made several comments regarding the possibility that Delta might run its course sooner than we expect. As noted below, he thinks we could be 2-3 weeks away from a peak. https://twitter. com/CNBC/status/1419806740267208706 _US cases still surging and likely to exceed 100,000 before peaking _US COVID-19 cases are still surging and as we noted in June 2021, we thought that US cases would likely surge towards >100,000 following the surge seen in the UK. - US cases might surge for next 12 days, or so - peaking at >100,000 But similar to UK, this means the Delta variant will run its course in the US Already many US states have seen a surge in cases versus the low. - biggest jump is Tennessee 26X - OK and AL close behind - OK surge has lasted 56 days, matched by AR at 55 days The takeaway is that each US state has its own cycle of case surges. And as the complete table later in this note shows, most states are several weeks into this surge. So we don't have to think this will last for infinity. - the risk is that a new mutation takes place in the US among the "unvaccinated" and - and this extends the surge Source: Fundstrat _... remarkable seasonality to states with biggest surges -- suggesting peak in next week or so _Below are 6 states with meaningful surges. And we compare the 2021 cases versus the same day in 2020. - the states FL, AR, AL, MO, NV, TN - see the striking seasonality? - in every case but AR, the 2021 surge is not worse than 2020 - If 2020 is a template, these surges will soon end Thus, we think the odds are high that we could see some states see cases rollover even sooner. Like this week. _STRATEGY: In Wave 2 during 2020, S&P 500 bottomed well ahead of the Wave 2 peak _Just to repeat a point we have made in the past. The S&P 500 has bottomed before the COVID-19 wave peaks. Given we are looking at "summer seasonality" the 2020 Wave 2 peak: - Wave 2 peaked 7/19/2021 - S&P 500 bottomed on 6/15 - 34 days before Wave 2 peaked - there was a minor "higher low" about 2 weeks later _BOTTOM LINE: RISK-ON SEEMS APPROPRIATE, ESPECIALLY IF FED REMAINS DOVISH (OUR EXPECTATION)_ But you get the picture. The S&P 500 bottoms well ahead of the COVID-19 peaks. - in 2021, we think the UK cases is the key template - the rollover over of UK cases is strongly arguing for risk-on - US seasonality is suggesting many states will see a peak in the current surge soon - FOMC is also likely to err on the dovish side So, we think this marks a reversal for Epicenter stocks. They have been crushed for 45 days due to the Delta surge. POINT 1: DAILY COVID-19 CASES 90,760, UP +4,290 (EX-FL&NE) VS 7D AGO... 7D DELTA (THE SPEED OF CASE RISE) HAS BEEN SLOWLY RISING OVER THE PAST WEEK... _____________________________ CURRENT TRENDS -- COVID-19 CASES: - Daily cases 90,760 vs 65,943 7D ago, up +24,817 - Daily cases ex-FL&NE 90,760 vs 57,931 7D ago, up +32,829 - 7D positivity rate 5.8% vs 4.9% 7D ago - Hospitalized patients 33,540, up +38% vs 7D ago - Daily deaths 273, up +7.3% vs 7D ago _____________________________ _*** Florida and Nebraska stopped publishing daily COVID stats updates on 6/4 and 6/30, respectively. We switched to use CDC surveillance data as the substitute. However, since CDC surveillance data is subject to a one-to-two day lag, we added a "US ex-FL&NE" in our daily cases and 7D delta sections in order to demonstrate a more comparable COVID development._ The latest COVID daily cases came in at 90,760, up +32,829 (ex-FL&NE). Monday's spike in daily cases is primarily due to the fact that over 2/3 of US states no longer report COVID stats over the weekend. And hence, daily cases on Monday reflect the total new cases over the past three days. That said, the 90,000 new cases remind us that COVID, or more specifically the Delta variant, is still spreading across the country. Considering the delayed data of Florida, the case figure should be about 100,000. The 7D delta in daily cases has been gradually rising over the past week and now is at ~15,000. As we noted, if US follows the same pattern as UK and India, US could be peaking in next two to three weeks. Hence, based on current speed of case rise, US cases (7D average) could reach 150,000 before starting to roll over. At state level, TN, OK, AL, SC, AR, MS, MA, LA, and NC are the states with the largest increase in daily cases compared to their recent lows (as shown in the "parabolic" tracker below), and all 8 states except MA and NC have less than 50% of their populations vaccinated with at least one dose, and 40% of their population fully vaccinated. This is consistent with what media have been reported regarding the majority of new cases being amongst unvaccinated individuals. Therefore, the COVID developments (both the case and vaccination trends) in these states along with the other low vaccinated states (such as GA, ID, WY, ND, IN) are worth watching. _7D delta in daily cases has been slowly rising, now at ~16,000... _The 7D delta in daily cases has been slowly rising over the past week. A rising 7D delta means the speed of the case rise is increasing. But given the "slow“ speed, the rise is not parabolic yet (at least so far). However, the future is uncertain, so cases could rise rapidly. We will be closely watching this metric. _LOW VACCINATED STATES SEEM TO HAVE A LARGER INCREASE IN DAILY CASES COMPARED TO THEIR RECENT LOW..._ Below, we added a new section called "Parabolic Case Surge Tracker" to monitor the possible parabolic surge in daily case figures. In the table, we included both the vaccine penetration and the recent case trend for 50 US states + DC. The table is sorted by the multiple of their current daily cases divided by their recent low in daily cases. - The states with higher ranks are the states that have seen a more significant rise in daily cases - We also calculated the number of days between now and the recent low date; a state with a high multiple but low number of days since its low means the state is facing a relatively rapid surge in daily cases - The US as a whole, UK, and Israel are also shown at the top as a reference _CURRENT HOSPITALIZATION AND POSITIVITY RATES ARE RISING... DAILY DEATHS REMAIN FLAT..._ Below we show the aggregate number of patients hospitalized due to COVID, daily mortality associated with COVID, and the daily positivity rate for COVID. As you can see, hospitalization and daily deaths are relatively low compared to the prior waves. However, with the recent increase in daily cases, current hospitalization is clearly turning upwards. Regarding positivity rate, it recently exceeded 5%, which is higher than the positivity rate we observed during the "mini" wave this April and significantly higher than the recent low of <2%. Daily deaths seem to be still flat, but it could reverse if case figures continue to rise. POINT 2: VACCINE: VACCINATION PACE HAS BEEN SLIGHTLY RISING OVER THE PAST FEW DAYS... _____________________________ CURRENT TRENDS -- VACCINATIONS: - avg 0.6 million this past week vs 0.5 million last week - overall, 48.8% fully vaccinated, 56.4% 1-dose+ received _____________________________ VACCINATION FRONTIER UPDATE --> ALL STATES NOW NEAR OR ABOVE 80% COMBINED PENETRATION (VACCINES + INFECTIONS) Below we sorted the states by the combined penetration (vaccinations + infections). The assumption is that a state with higher combined penetration is likely to be closer to herd immunity, and therefore, less likely to see a parabolic surge in daily cases and deaths. Please note that this "combined penetration" metric can be over 100%, as infected people could also be vaccinated (actually recommended by CDC). - Currently, all states are near or above 80% combined penetration - RI, MA, SD, CT, NJ, IL, NY, DE, NM, UT, PA, ND, AZ, MN, CA, FL, NE are now above 100% combined penetration (vaccines + infections). Again, this metric can be over 100%, as infected people could also be vaccinated. But 100% combined penetration does not mean that the entire population within each state is either infected or vaccinated. Below is a diffusion chart that shows the % of US states (based on state population) that have reached the combined penetration >60%/70%/80%/90%. As you can see, all states have reached 60% and 70% combined vaccination + infection. 96.8% of US states (based on state population) have seen combined infection & vaccination >80% and 65.6% of US states have seen combined infection & vaccination >90%. There were a total of 390,956 doses administered reported on Monday. Over the past two weeks, the vaccination pace has been mostly flat, but appears to be slightly rising recently. Perhaps people are becoming more inclined to get vaccinated over growing delta variant concerns. But this is actually a good sign. Admittedly, nearly 2/3 of the US population eligible (age 12+) to receive COVID vaccines have already received at least one dose. For some people among the remaining 1/3, vaccine hesitancy concerns might not easily be reversed. But in order to prevent another parabolic surge in daily cases, hospitalizations, and fatalities, getting more people fully vaccinated remains the key. _99.1% of the US has seen 1-dose penetration >40%... _ To better illustrate the actual footprint of the US vaccination effort, we have a time series showing the percent of the US with at least 45%/45%/50% of its residents fully vaccinated, displayed as the orange line on the chart. Currently, 87.3% of US states have seen 40% of their residents fully vaccinated. However, when looking at the percentage of the US with at least 45% of its residents fully vaccinated, this figure is 64.7%. And only 44.5% of US (by state population) have seen 50% of its residents fully vaccinated. - While 99.1% of US states have seen vaccine penetration >40%, 93.4% of them have seen 1 dose penetration >45% and 78.1% of them have seen 1 dose penetration > 50%. - 87.3% of the US has at least 40% of its residents fully vaccinated, However, only 64.7% of US has fully vaccinated >45% and 44.5% of US has fully vaccinated >50%. This is the state by state data below, showing information for individuals with one dose and two doses. The ratio of vaccinations/ daily confirmed cases has been falling significantly (red line is 7D moving avg). Both the surge in daily cases and decrease in daily vaccines administered contributed to this. - the 7D moving average is about ~15 for the past few days - this means 15 vaccines dosed for every 1 confirmed case In total, 340 million vaccine doses have been administered across the country. Specifically, 187 million Americans (56% of US population) have received at least 1 dose of the vaccine. And 162 million Americans (49% of US population) are fully vaccinated. POINT 3: Tracking restrictions lifting and subsequent effects in individual states Point #3 focuses primarily on tracking the lifting of restrictions, as states have eased the majority of mandates. Keep in mind, easing/lifting restrictions are contingent upon state of emergency ordinances being renewed. - States in groups 1 and 2 represent states that let their emergency ordinances expire, or that never had one in the first place - Note: IL and HI are not listed. This is because restrictions lifting is determined at the county / island level, and no statewide policy will be established to lift restrictions until a full reopening So there is a spectrum of approaches. Our team is listing 3 tiers of states and these are shown below. - states that eased all restrictions in 2020: AK, OK, MO, FL, TN - states that have eased all restrictions in 2021 to now: ND, SD, NE, ID, IA, MT, MS, AZ, SC, WY, TX, GA, AR, KS, WI, IN, AL, UT, NH, LA, NJ, KY, MN, MA, VT, OH, WV, ME, MI, NY, OR, PA, MD, DE - states that are still easing restrictions in 2021: WA, NC, CA, NM, CO, NV, CT, VA, RI, DC GROUP 1: STATES THAT LIFTED RESTRICTIONS IN 2020... The daily case trends in these states are impressive and it is difficult to say that lifting restrictions has actually caused a new wave of cases because the case trends in these states look like other states. GROUP 2: STATES THAT HAVE LIFTED RESTRICTIONS IN 2021 TO NOW... Similar to the list of states above, the daily case trends in these states are impressive and it seems that lifting restrictions hasn’t caused an increase in cases. GROUP 3: STATES THAT ARE STILL EASING RESTRICTIONS IN 2021... These states have begun to lift restrictions, but have yet to ease all restrictions. The date of each state’s most recent restrictions lifting is indicated on each chart. The case trends in these states have been mostly positive. - Easing restrictions appears to have contributed to an increase in cases in several of these states, most drastically in OR, ME, WA, and MN

UK Cases rolling over (surge lasted 45 days) = Epicenter 2H2021 rally expected to start this week

* Monday * Tuesday * Wednesday * SKIP THURSDAY * Friday STRATEGY: UK CASES ROLLING OVER (SURGE LASTED 45 DAYS) = EPICENTER STOCKS EXPECTED TO RALLY THIS WEEK _UK Cases are rolling over -- Delta surge last 45 days _Perhaps the most important development over the past week is that UK COVID-19 cases are decisively rolling over. - On June 3, UK cases starting to ~3,000 per day - Due to the Delta variant - UK pursued full re-opening, despite surge in cases - On July 17, UK cases peak at 54,000 after rising parabolically - This nearly matches prior record peak 67,000 in early Jan 2021 - Delta variant wave lasted 45 days The last point is key. The UK saw a relentless parabolic surge in cases. This lasted 45 days. And even without any mitigation measures, the UK cases have been falling now for the past week. _... USA IS 33 DAYS INTO A SURGE --> 12 DAYS BEFORE USA CASES PEAK? MAYBE_ If the US follows the template of the UK, daily cases in USA might be peaking in the next 12 days: - UK cases peaked 45 since start of surge - USA is 33 days into surge - as we wrote last week, stocks bottomed 34 days before Wave 2 cases peaked (June 2020) - thus, we think stocks already bottomed   _USA base case remains Delta is "more bark than bite" _Financial markets have been roiled by concerns that the Delta variant surge will trigger a rollback in US economic freedoms -- not just USA, but around the world. In our multiple zooms/meetings/calls over the past week, the question of lockdowns has been brought up in every meeting. But our base case remains that the Delta variant is more "bark than bite": - In India, where Delta first identified, ~80% of cases were asymptomatic - mRNA vaccines (Pfizer/Moderna) still provide >88% protection against Delta hospitalization - 69% of American adults vaccinated (60% fully) - UK cases peaked after 45 days - USA is 33 days into its current surge So, I just don't see the point in any policymakers rolling back economic re-openings, because the Delta variant. In fact, this would seem somewhat less logical given the most "at risk" Americans are those unvaccinated. And this is increasingly looking like a personal choice: - if 80% of "unvaxxed" Delta cases are asymptomatic - if vaccines still provide ~90% protection against hospitalizations - In USA, 69% of working Americans are vaccinated - thus, only 31% of adults are unvaxxed (low share) We think policymakers will increasingly "blame shift" COVID-19 surges on the unvaccinated Americans. In fact, I don't think this is purely just policymakers. It may be that businesses and even other nations will increasingly take on policies distinguishing between vaccinated and unvaccinated. - Alabama Governor Ivey even said Friday "start blaming the unvaccinated folks" - Alabama has among the lowest vaccination rates in the US   Source: https://www. cnn. com/2021/07/23/politics/alabama-governor-kay-ivey-unvaccinated-covid/index. html And even the NFL is warning team owners that teams could forfeit games if COVID-19 outbreaks take place. This is a major shift in the reaction function of sports teams, governors, policymakers. - in 2020, COVID-19 was the unforeseen enemy and measures take to "protect everyone" - in 2021, COVID-19 spread is seen caused by "unvaccinated Americans" Source: https://www. cnbc. com/2021/07/22/nfl-warns-teams-could-forfeit-games-if-covid-outbreaks-occur-among-unvaccinated-players. html__source=iosappshare%7Ccom. slack. slackmdm. share _EVEN DR. FAUCI IS NOT TALKING ABOUT ROLLING BACK ECONOMIC RE-OPENING, BUT "COURSE CORRECTING" ON MASKS__ _With Delta surging throughout the US, and with the growing possibility that COVID-19 is seasonal, we naturally expect policymakers to "course correct" - course correct = keep economy open, but adjust - Dr. Fauci on Sunday suggested indoor mask mandates might return While the idea of masks remain unpopular, particularly among COVID-19 skeptics, it surely seems to have stopped the flu season entirely. Source: https://www. bostonherald. com/2021/07/25/fauci-new-mask-guidelines-for-fully-vaccinated-people-under-active-consideration-as-coronavirus-cases-surge/ _STRATEGY: If UK cases are rolling over, we expect Epicenter stocks to start leading, starting this week _The rolling over of UK COVID-19 cases (as noted above) is a tactical signal for Epicenter stocks to begin outperforming: - UK cases started to rise parabolically on 6/2/2021 (below) - Energy stocks/Epicenter peaked on 6/3/2021 (+1 day lag) - UK cases surged for 45 days peaking on 7/17/2021 - Epicenter stocks underperformed for 46 days, bottoming on 7/19/2021 (+2 day lag) - UK took zero mitigation steps, and in fact, moved to a full reopening - UK cases have been falling for 7 days now Our takeaway? - we think Energy/Epicenter stocks are going to start to rally beginning this week - Energy/Epicenter got torched as investors fretted about Delta surge - we don't think USA cases need to plateau - Investors will simply overlay UK vs USA and Israel vs USA _... Since UK Delta surge started, Technology and Healthcare led, while Epicenter crashed _Since Delta cases surged in UK, one can see the violent rotation below. - in the 45 days since - Technology/Healthcare led +7%/+3% vs S&P 500 - Epicenter torched We think this will reverse imminently. _"JULY CHOP" LIKELY ENDING AS WELL..._ We also think the case for a July chop is now ceasing. We think a stronger more generalized "risk on" will start soon: - Markets got nervous about Delta surge, which started in UK/Israel - Delta peaked in UK on 7/17/2021, 7 days ago - UK policymakers took ZERO steps to mitigate - USA policymakers taking ZERO steps to mitigate - Stocks seemed to have tracked UK Delta surge closely Moreover, as shown below, the breadth of the S&P 500 rally remains solid. The advance/decline line remains rising. And the spot VIX fell further last week, falling to 17. - VIX barely managed a "low energy" surge to 25 _... Epicenter stocks gave up huge gains in the past 45 days ---> we see a fierce rally in 2H2021 _In the past 45 days, Epicenter stocks saw huge declines. And now they are down vs pre-pandemic levels (vs S&P 500). - why would Epicenter stocks be "worse" now vs December 2020? - Visibility likely to improve in next few weeks with Delta likely rolling in USA within 12 days - Fed still dovish - Infrastructure spending coming - July chop is over Thus, we see a strong rally in Epicenter stocks in 2H2021. POINT 1: DAILY COVID-19 CASES 11,912, UP +4,290 (EX-FL&NE) VS 7D AGO... 7D DELTA (THE SPEED OF CASE RISE) HAS BEEN SLOWLY RISING OVER THE PAST WEEK... _____________________________ Current Trends -- COVID-19 cases: - Daily cases 11,912 vs 15,632 7D ago, down -3,720 - Daily cases ex-FL&NE 11,912 vs 7,622 7D ago, up +4,290 - 7D positivity rate 5.6% vs 4.7% 7D ago - Hospitalized patients 31,662, up +41% vs 7D ago - Daily deaths 265, up +1.2% vs 7D ago _____________________________ _*** Florida and Nebraska stopped publishing daily COVID stats updates on 6/4 and 6/30, respectively. We switched to use CDC surveillance data as the substitute. However, since CDC surveillance data is subject to a one-to-two day lag, we added a "US ex-FL&NE" in our daily cases and 7D delta sections in order to demonstrate a more comparable COVID development._ On Sunday, 14 states and Puerto Rico reported a total of 11, 912 new cases. All 14 states and PR reported higher daily cases than 7D ago. Regarding the 7D delta in daily cases (the speed of case rise), it has been gradually rising over the past week and now is at ~14,000. As we noted above, if US follows the same pattern as UK, US could be peaking in about two weeks (12 days). Hence, based on current speed of case rise, US cases could reach 100,000 before starting to roll over.   _7D delta in daily cases has been slowly rising, now at ~14,000... _The 7D delta in daily cases has been slowly rising over the past week. A rising 7D delta means the speed of the case rise is increasing. But given the "slow“ speed, the rise is not parabolic yet (as lease so far). However, the future is uncertain, so that it could rise rapidly. We will be closely watching this metric. _LOW VACCINATED STATES SEEM TO HAVE A LARGER INCREASE IN DAILY CASES COMPARED TO THEIR RECENT LOW..._ Below, we added a new section called "Parabolic Case Surge Tracker" to monitor the possible parabolic surge in daily case figures. In the table, we included both the vaccine penetration and the recent case trend for 50 US states + DC. The table is sorted by the multiple of their current daily cases divided by their recent low in daily cases. - The states with higher ranks are the states that have seen a more significant rise in daily cases - We also calculated the number of days between now and the recent low date; a state with a high multiple but low number of days since its low means the state is facing a relatively rapid surge in daily cases - The US as a whole, UK, and Israel are also shown at the top as a reference   _CURRENT HOSPITALIZATION AND POSITIVITY RATES ARE RISING... DAILY DEATHS REMAIN FLAT..._ Below we show the aggregate number of patients hospitalized due to COVID, daily mortality associated with COVID, and the daily positivity rate for COVID. As you can see, hospitalization and daily deaths are relatively low compared to the prior waves. However, with the recent increase in daily cases, current hospitalization is clearly turning upwards. Regarding positivity rate, it recently exceeded 5%, which is higher than the positivity rate we observed during the "mini" wave this April and significantly higher than the recent low of <2%. Daily deaths seem to be still flat, but it could reverse if case figures continue to rise. POINT 2: VACCINE: VACCINATION PACE HAS BEEN SLIGHTLY RISING OVER THE PAST FEW DAYS... THE EFFORT TO GET MORE PEOPLE FULLY VACCINATED REMAINS THE KEY... _____________________________ CURRENT TRENDS -- VACCINATIONS: - avg 0.6 million this past week vs 0.5 million last week - overall, 48.8% fully vaccinated, 56.3% 1-dose+ received _____________________________ VACCINATION FRONTIER UPDATE --> ALL STATES NOW NEAR OR ABOVE 80% COMBINED PENETRATION (VACCINES + INFECTIONS) Below we sorted the states by the combined penetration (vaccinations + infections). The assumption is that a state with higher combined penetration is likely to be closer to herd immunity, and therefore, less likely to see a parabolic surge in daily cases and deaths. Please note that this "combined penetration" metric can be over 100%, as infected people could also be vaccinated (actually recommended by CDC). - Currently, all states are near or above 80% combined penetration - RI, MA, SD, CT, NJ, IL, NY, DE, NM, UT, PA, ND, AZ, MN, CA, FL are now above 100% combined penetration (vaccines + infections). Again, this metric can be over 100%, as infected people could also be vaccinated. But 100% combined penetration does not mean that the entire population within each state is either infected or vaccinated. Below is a diffusion chart that shows the % of US states (based on state population) that have reached the combined penetration >60%/70%/80%/90%. As you can see, all states have reached 60% and 70% combined vaccination + infection. 96.8% of US states (based on state population) have seen combined infection & vaccination >80% and 65.6% of US states have seen combined infection & vaccination >90%.   There were a total of 773,145 doses administered reported on Sunday. Over the past 7 days, 582,755 doses were administered per day on average, up 15% from 7D ago. Over the past 2 weeks, the vaccination pace has been mostly flat, but appears to be slightly rising. It has similarly risen slightly compared to 7D ago and somewhat sharply over the past 4-5 days. Perhaps people are becoming more inclined to get vaccinated over growing delta variant concerns? We'll continue to monitor this trend.   Admittedly, nearly 2/3 of the US population eligible (age 12+) to receive COVID vaccines have already received at least one dose. For some people among the remaining 1/3, vaccine hesitancy concerns might not easily be reversed. But in order to prevent another parabolic surge in daily cases, hospitalizations, and fatalities, getting more people fully vaccinated remains the key.   _99.1% of the US has seen 1-dose penetration >40%... _ To better illustrate the actual footprint of the US vaccination effort, we have a time series showing the percent of the US with at least 45%/45%/50% of its residents fully vaccinated, displayed as the orange line on the chart. Currently, 87.3% of US states have seen 40% of their residents fully vaccinated. However, when looking at the percentage of the US with at least 45% of its residents fully vaccinated, this figure is 64.7%. And only 44.5% of US (by state population) have seen 50% of its residents fully vaccinated. - While 99.1% of US states have seen vaccine penetration >40%, 93.4% of them have seen 1 dose penetration >45% and 78.1% of them have seen 1 dose penetration > 50%. - 87.3% of the US has at least 40% of its residents fully vaccinated, However, only 64.7% of US has fully vaccinated >45% and 44.5% of US has fully vaccinated >50%. This is the state by state data below, showing information for individuals with one dose and two doses. The ratio of vaccinations/ daily confirmed cases has been falling significantly (red line is 7D moving avg). Both the surge in daily cases and decrease in daily vaccines administered contributed to this. - the 7D moving average is about ~15 for the past few days - this means 15 vaccines dosed for every 1 confirmed case In total, 340 million vaccine doses have been administered across the country. Specifically, 187 million Americans (56% of US population) have received at least 1 dose of the vaccine. And 162 million Americans (49% of US population) are fully vaccinated.     POINT 3: Tracking restrictions lifting and subsequent effects in individual states Point #3 focuses primarily on tracking the lifting of restrictions, as states have eased the majority of mandates. Keep in mind, easing/lifting restrictions are contingent upon state of emergency ordinances being renewed. - States in groups 1 and 2 represent states that let their emergency ordinances expire, or that never had one in the first place - Note: IL and HI are not listed. This is because restrictions lifting is determined at the county / island level, and no statewide policy will be established to lift restrictions until a full reopening So there is a spectrum of approaches. Our team is listing 3 tiers of states and these are shown below. - states that eased all restrictions in 2020: AK, OK, MO, FL, TN - states that have eased all restrictions in 2021 to now: ND, SD, NE, ID, IA, MT, MS, AZ, SC, WY, TX, GA, AR, KS, WI, IN, AL, UT, NH, LA, NJ, KY, MN, MA, VT, OH, WV, ME, MI, NY, OR, PA, MD, DE - states that are still easing restrictions in 2021: WA, NC, CA, NM, CO, NV, CT, VA, RI, DC GROUP 1: STATES THAT LIFTED RESTRICTIONS IN 2020... The daily case trends in these states are impressive and it is difficult to say that lifting restrictions has actually caused a new wave of cases because the case trends in these states look like other states. GROUP 2: STATES THAT HAVE LIFTED RESTRICTIONS IN 2021 TO NOW... Similar to the list of states above, the daily case trends in these states are impressive and it seems that lifting restrictions hasn’t caused an increase in cases. GROUP 3: STATES THAT ARE STILL EASING RESTRICTIONS IN 2021... These states have begun to lift restrictions, but have yet to ease all restrictions. The date of each state’s most recent restrictions lifting is indicated on each chart. The case trends in these states have been mostly positive. - Easing restrictions appears to have contributed to an increase in cases in several of these states, most drastically in OR, ME, WA, and MN

75 million American adults unvaccinated, >40 million co-morbidity = delta driving higher hospitalizations. July chop = trend noise = 2H +10% rally base case

* Monday * Tuesday * Wednesday * SKIP THURSDAY * Friday STRATEGY: JULY CHOP = TREND NOISE = 2H +10% RALLY BASE CASE The Delta variant is essentially correctly viewed as "pandemic of the unvaccinated" For the most part, we continue to view the COVID-19 Delta variant as more "bark than bite" in USA. Meaning, while there may be short term hysteria about the surge in USA cases due to Delta variant, we do not think policymakers will "close" the US economy. - in other words, we think the 2H2021 economic resurgence remains on track President Biden, Wednesday night at a town hall, called the current resurgence a 'pandemic' of the unvaccinated. We believe this is essentially correct. Sure, there are breakthrough cases, and breakthrough cases could surge in the USA. But we do think the severity of healthcare risks are mostly resting on the "unvaccinated" Americans. https://www. usnews. com/news/health-news/articles/2021-07-17/biden-grappling-with-pandemic-of-the-unvaccinated _... but the Delta variant is causing a surge in USA hospitalizations, contrasting with UK and Israel _The UK and Israel are similarly seeing a resurgence in cases, and the USA surge is far weaker, so far, than either UK or Israel (see below section on parabolic analysis). But this is not the key difference: - UK, hospitalizations barely budging --> Delta "bark no bite" - Israel, hospitalizations barely budging --> Delta "bark no bite" - USA, hospitalizations eh... might be rising --> Delta "more bite, but still little bite" OK. So Delta is sort of looking like no big deal in UK and Israel. And hence, the UK is still moving full force with its reopening. But the US upturn in cases is somewhat worse._ _ _... USA incremental hospitalization rates 2.3% > Wave 3 peak of 1.5% and 10X UK _The US incremental hospitalization rate is troubling: - UK incremental hospitalization rate --> 0.2% - Israel incremental hospitalization rate --> 0.9% - USA incremental hospitalization rate --> 2.3% - 10X UK - exceeds USA Wave 3 of 1.5% So, Delta is creating a higher level of hospitalization in the US, compared to what Delta is doing in UK and Israel. This is somewhat alarming. At least in my opinion. _...69% of USA adults 1-dose or more of COVID-19 vaccination = 31% unvaccinated _The percentage of Americans age >18-plus with 1 dose of a COVID-19 vaccine is actually 69%. This is a surprisingly high percentage: - meaning about 31% of Americans age 18+ have no vaccination - this is about 55 million American with no vaccination In other words, there is still a staggering 73 million Americans with no vaccination from COVID-19. - many will have already been infected with a prior infection - per IHME estimates, about 25% of Americans were infected - still, this means about 55 million Americans have had no infection and no vaccination So, this is the most vulnerable pool of Americans. And it is a surprisingly high figure. _75 million Americans with no vaccination, >50%, or >40 million have co-morbidity = higher hospitalization risk _The reason we think hospitalization rates in USA are higher, is that >50% of these unvaccinated adults has a co-morbidity, meaning a higher risk of getting hospitalized: - 25% high blood pressure - 23% obese - 11% smokers - 7% diabetic - 6% asthma - 5% immune compromised - 5% COPD or other You get the picture. These are exactly the people at risk of getting a severe/riskier case of COVID-19. Sure, there is overlapping conditions (ie, diabetic + obese, etc). - but >50% of unvaccinated have a co-morbidity Therefore, is it any wonder that USA hospitalization rates could be surging vs UK and Israel? Those nations have a lower prevalence of co-morbidity. That is the big difference. For now, this does not change our view the USA Delta variant is more "bark than bite" -- but it does support the notion that this pandemic is a "pandemic of the unvaccinated" _STRATEGY: July Chop still baseline, but focus should be on 2H2021 _We are almost done with the month of July and as the 30-minute price chart below shows, July is indeed a month of chop. This has been our base case: Our original S&P 500 base case: - rally to 4,400 - potential decline to 4,100 - exit month 4,300 As shown below, the month has seemingly played out this way: - rally to 4,394 - fall to 4,233 - exit month?? --> possible 4,300-ish As we wrote about several times, we expected July to be simply a tough month for several reasons: - Delta variant, we believe, could surge to 100,000 USA cases = headline risk - after strong 1H rally >13%, July historically chop with drawdowns 3%-5% - because of "revenge travel," we expect many institutional investors to be "on the beach" = buyers strike So, this means existing market momentum/trends are disrupted. This is what we are seeing. Many stocks/sectors have been shot out of the sky and others have fallen so much, it feels like an obliteration. However, we do not believe July is a change in trend. It is just a reminder to me that one never makes money in markets in July and August (yup). _Good news = VIX low energy surges = downtrend intact _We are not more bearish because the VIX continues to send a positive signal. As you can see, the VIX made a low Energy surge in July. And this failed at our "arbitrary trendline" and has since sunk again: - VIX falling = risk-on     _SECTOR STRATEGY: Still see Epicenter lead in 2H2021, even as "buyers strike" today _We continue to see 2021 being led by Epicenter stocks. That is, groups hardest hit by the pandemic and we see reasons to like Epicenter. The strongest argument, in our view, is Epicenter groups have the greatest capacity to positively surprise: - operating leverage from cost cutting - demand surprise from revenge spending That is the simplest explanation. July is a month of a buyers strike. And therefore, groups that are seen with cyclical risk are going to get hit the hardest. Hence, there has been a lot of selling pressure in the cyclical epicenter groups. But as we stated above, this is not what we see for 2H2021. But it is not surprising. _... resilience in oil speaks to the momentum of the economic reopening _We know investors are questioning the economic reopening given the Delta variant. This explains the collapse in bond yields, etc. But we believe Delta will not change the course of the global re-opening ultimately. And if one is doubtful, one can look at the resilience in oil. - oil had a sharp fall in the month - bounced sharply - still in an uptrend - at $72, looks on track to hit $80-plus this year _Similarly, look at Oilfield Services, OIH ETF, looks ready to surge after bouncing off 200D _OIH similarly fell sharply in July. But: - the uptrend remains intact - bounced off 200D moving average - daily RSI got fiercely oversold - similar to March 2020 and Sept 2020 Did you see the monster rallies that followed? I don't see why this is any different. We see OIH rallying strongly in 2H2021.   POINT 1: DAILY COVID-19 CASES 47,433, UP +19,000 (EX-FL) VS 7D AGO... 7D DELTA (THE SPEED OF CASE RISE) HAS BEEN SLOWLY RISING OVER THE PAST 3 DAYS... _____________________________ Current Trends -- COVID-19 cases: - Daily cases 47,433 vs 3,6769 7D ago, up +10,664 - Daily cases ex-FL 47,433 vs 28,433 7D ago, up +19,000 - 7D positivity rate 5.7% vs 4.0% 7D ago - Hospitalized patients 26,527, up +29% vs 7D ago - Daily deaths 199, down -27% vs 7D ago _____________________________ _*** Florida and Nebraska stopped publishing daily COVID stats updates on 6/4 and 6/30, respectively. We switched to use CDC surveillance data as the substitute. However, since CDC surveillance data is subject to a one-to-two day lag, we added a "US ex-FL&NE" in our daily cases and 7D delta sections in order to demonstrate a more comparable COVID development._ Daily cases are generally rising across all US states. The latest COVID daily cases came in at 47,433 up +19,000 (ex-FL). Although at a slow pace, the 7D delta has been rising over the past 3 days. Currently, the 7D average of 7D delta in daily cases increased to ~12,000. Besides 7D delta, current hospitalization also rose approximately 30% from ~20,000 to ~26,000 over the past 7 days.   However, we have not seen the daily deaths to rise so far. According to what we observed in the prior three COVID waves, it roughly took two to three weeks for the daily deaths to start to trend upwards following the case surge. It has been a month since the case trend rebounded (daily cases bottomed on 6/22/21), and the death trend remains downwards. We think the vaccination is what makes this wave different from the prior three. Admittedly, the death trend could eventually go up if there is a dramatic increase in daily cases. But, vaccinations could largely prevent the death toll from being the same "dramatic." And as we noted many times, continued efforts to get more people vaccinated are the key at this pandemic stage.   _7D delta in daily cases has been slowly rising, now at ~12,000... _The 7D delta in daily cases has been slowly rising over the past 3 days. A rising 7D delta means the speed of the case rise is increasing. But given the "slow“ speed, the rise is not parabolic yet (as lease so far). However, the future is uncertain, so that it could rise rapidly. We will be closely watching this metric. _LOW VACCINATED STATES SEEM TO HAVE A LARGER INCREASE IN DAILY CASES COMPARED TO THEIR RECENT LOW..._ Below, we added a new section called "Parabolic Case Surge Tracker" to monitor the possible parabolic surge in daily case figures. In the table, we included both the vaccine penetration and the recent case trend for 50 US states + DC. The table is sorted by the multiple of their current daily cases divided by their recent low in daily cases. - The states with higher ranks are the states that have seen a more significant rise in daily cases - We also calculated the number of days between now and the recent low date; a state with a high multiple but low number of days since its low means the state is facing a relatively rapid surge in daily cases - The US as a whole, UK, and Israel are also shown at the top as a reference   _CURRENT HOSPITALIZATION AND POSITIVITY RATES ARE RISING... DAILY DEATHS REMAIN ON A DOWNTREND..._ Below we show the aggregate number of patients hospitalized due to COVID, daily mortality associated with COVID, and the daily positivity rate for COVID. As you can see, hospitalization and daily deaths are relatively low compared to the prior waves. However, with the recent increase in daily cases, current hospitalization is clearly turning upwards. Regarding positivity rate, it recently exceeded 5%, which is higher than the positivity rate we observed during the "mini" wave this April and significantly higher than the recent low of <2%. Daily deaths seem to be still on its downtrend, but it could reverse if case figures continue to rise. POINT 2: VACCINE: VACCINATION PACE HAS BEEN FLAT OVER THE PAST WEEK... THE EFFORT TO GET MORE PEOPLE FULLY VACCINATED REMAINS THE KEY... _____________________________ CURRENT TRENDS -- VACCINATIONS: - avg 0.5 million this past week vs 0.5 million last week - overall, 48.5% fully vaccinated, 55.9% 1-dose+ received _____________________________ VACCINATION FRONTIER UPDATE --> ALL STATES NOW NEAR OR ABOVE 80% COMBINED PENETRATION (VACCINES + INFECTIONS) Below we sorted the states by the combined penetration (vaccinations + infections). The assumption is that a state with higher combined penetration is likely to be closer to herd immunity, and therefore, less likely to see a parabolic surge in daily cases and deaths. Please note that this "combined penetration" metric can be over 100%, as infected people could also be vaccinated (actually recommended by CDC). - Currently, all states are near or above 80% combined penetration - RI, MA, SD, CT, NJ, IL, NY, DE, NM, UT, PA, ND, AZ, MN, CA, FL are now above 100% combined penetration (vaccines + infections). Again, this metric can be over 100%, as infected people could also be vaccinated. But 100% combined penetration does not mean that the entire population within each state is either infected or vaccinated. Below is a diffusion chart that shows the % of US states (based on state population) that have reached the combined penetration >60%/70%/80%/90%. As you can see, all states have reached 60% and 70% combined vaccination + infection. 96.8% of US states (based on state population) have seen combined infection & vaccination >80% and 65.6% of US states have seen combined infection & vaccination >90%.   There were a total of 655,422 doses administered reported on Thursday. Over the past 7 days, 529,290 doses were administered per day on average, up 0.6% from 7D ago. Over the past 2 weeks, the vaccination pace has been mostly flat, but appears to be slightly rising. It has similarly risen slightly compared to 7D ago and somewhat sharply over the past 2 days. Perhaps people are becoming more inclined to get vaccinated over growing delta variant concerns? We'll continue to monitor this trend.   Admittedly, nearly 2/3 of the US population eligible (age 12+) to receive COVID vaccines have already received at least one dose. For some people among the remaining 1/3, vaccine hesitancy concerns might not easily be reversed. But in order to prevent another parabolic surge in daily cases, hospitalizations, and fatalities, getting more people fully vaccinated remains the key.   _99.1% of the US has seen 1-dose penetration >40%... _ To better illustrate the actual footprint of the US vaccination effort, we have a time series showing the percent of the US with at least 45%/45%/50% of its residents fully vaccinated, displayed as the orange line on the chart. Currently, 87.3% of US states have seen 40% of their residents fully vaccinated. However, when looking at the percentage of the US with at least 45% of its residents fully vaccinated, this figure is 63.4%. And only 44.5% of US (by state population) have seen 50% of its residents fully vaccinated. - While 99.1% of US states have seen vaccine penetration >40%, 92.3% of them have seen 1 dose penetration >45% and 78.1% of them have seen 1 dose penetration > 50%. - 87.3% of the US has at least 40% of its residents fully vaccinated, However, only 63.4% of US has fully vaccinated >45% and 44.5% of US has fully vaccinated >50%. This is the state by state data below, showing information for individuals with one dose and two doses. The ratio of vaccinations/ daily confirmed cases has been falling significantly (red line is 7D moving avg). Both the surge in daily cases and decrease in daily vaccines administered contributed to this. - the 7D moving average is about ~20 for the past few days - this means 20 vaccines dosed for every 1 confirmed case In total, 338 million vaccine doses have been administered across the country. Specifically, 186 million Americans (56% of US population) have received at least 1 dose of the vaccine. And 161 million Americans (49% of US population) are fully vaccinated.     POINT 3: Tracking restrictions lifting and subsequent effects in individual states Point #3 focuses primarily on tracking the lifting of restrictions, as states have eased the majority of mandates. Keep in mind, easing/lifting restrictions are contingent upon state of emergency ordinances being renewed. - States in groups 1 and 2 represent states that let their emergency ordinances expire, or that never had one in the first place - Note: IL and HI are not listed. This is because restrictions lifting is determined at the county / island level, and no statewide policy will be established to lift restrictions until a full reopening So there is a spectrum of approaches. Our team is listing 3 tiers of states and these are shown below. - states that eased all restrictions in 2020: AK, OK, MO, FL, TN - states that have eased all restrictions in 2021 to now: ND, SD, NE, ID, IA, MT, MS, AZ, SC, WY, TX, GA, AR, KS, WI, IN, AL, UT, NH, LA, NJ, KY, MN, MA, VT, OH, WV, ME, MI, NY, OR, PA, MD, DE - states that are still easing restrictions in 2021: WA, NC, CA, NM, CO, NV, CT, VA, RI, DC GROUP 1: STATES THAT LIFTED RESTRICTIONS IN 2020... The daily case trends in these states are impressive and it is difficult to say that lifting restrictions has actually caused a new wave of cases because the case trends in these states look like other states. GROUP 2: STATES THAT HAVE LIFTED RESTRICTIONS IN 2021 TO NOW... Similar to the list of states above, the daily case trends in these states are impressive and it seems that lifting restrictions hasn’t caused an increase in cases. GROUP 3: STATES THAT ARE STILL EASING RESTRICTIONS IN 2021... These states have begun to lift restrictions, but have yet to ease all restrictions. The date of each state’s most recent restrictions lifting is indicated on each chart. The case trends in these states have been mostly positive. - Easing restrictions appears to have contributed to an increase in cases in several of these states, most drastically in OR, ME, WA, and MN

In USA, lower VAX rates age 16-64 = parabolic rise in state cases. Sufficient panic shown in VIX term structure associated with market bottoms

* Monday * Tuesday * Wednesday * SKIP THURSDAY * Friday STRATEGY: SUFFICIENT PANIC SHOWN IN VIX TERM STRUCTURE ASSOCIATED WITH MARKET BOTTOMS The global story of COVID-19 is the Delta variant... Over the past 8 weeks, the story of COVID-19 has become almost singularly about the Delta variant. There are many ways to show this, but the simplest graphic is one from Ourworldindata. org which shows a time series and share of cases associated with Delta variant. - in UK/India 100% - USA >95% - Australia >90% - Italy >85% OK, you get the picture. The Delta variant is the most transmissible mutation and has already caused a parabolic surge in UK, Israel, and dozens of states in the US. Source: https://ourworldindata. org/grapher/covid-cases-delta? time=2021-02-22.. latest&country=BRA~GBR~USA~ITA~ESP~DEU~IND _... It is still unclear if vaccinations prevent Delta virus _And the unfortunate reality is that Delta is causing "breakthrough" cases in fully vaccinated adults. This is evident in multiple nations and from a increasingly multiple anecdotes we are hearing in the US. - but breakthroughs do not mean vaccines are ineffective - but breakthroughs do raise the question about the effectiveness of vaccines There are a number of studies showing that some vaccines offer significantly lower protection against the Delta variant. The latest is this one cited by the NY Times (published on BioRxiv, see below). And shows the J&J vaccine effectiveness is not providing insufficient boost to antibody protection, and the authors suggest a booster is needed. But it is not just J&J, as Israel, which exclusively used the Pfizer vaccine, has seen breakthrough cases as well. - so I don't think the evidence is clear whether mRNA vaccines protect against the Delta variant - and other mutations plus future mutations, such as Lambda variant, mean vaccine protection is seeing its limits Source: https://www. nytimes. com/2021/07/20/health/coronavirus-johnson-vaccine-delta. html Source: https://www. biorxiv. org/content/10.1101/2021.07.19.452771v1 _... but curiously, US states with lower vaccination rates are seeing exponentially faster surge in cases _That said, tireless Ken pulled together some analysis looking at the vaccination rates of "working age" Americans and the associated change in cases. - we chose age 18-64 because this is working population of USA - and age 18-64 is the most mobile cohort - thus, infection rates and vaccination rates of this cohort is the most important for keeping the economy open The scatter chart below shows the comparative relationship between vaccination rates and case growth: - X-axis is "fully vaccinated" rate of age 18-64, by state - Y-axis is 14D change in COVID-19 cases As shown below, there seems to be a pronounced relationship. - states with lower vax rates are seeing exponential rise in cases - this relationship is not "linear" but "exponential" = states with lower vax rates are seeing a far worse breakout in cases So the casual observation is that at this stage in the US, vaccination rates of age 18-64 seem to be important to mitigate the surge in cases associated with Delta variant. But the future is uncertain. As we noted Monday, there is some arguments to be made that COVID-19 might actually be a seasonal virus. And that comparing case patterns 2021 vs 2020 certainly seem to argue this. _STRATEGY: Sufficient panic shown in VIX term structure associated with market bottoms _In the multiple discussions I had over the past few days, clients have asked us this simple question: - "how can stocks rise if the Delta variant is causing a surge in cases?" In short, the answer is YES. But let me explain below: - policymakers will be reluctant to shutdown the economy again - UK is a template, fully re-open despite a parabolic rise in cases - India cases rolling over HARD. Delta is 100% cases there - stocks bottom way ahead of case peaks --> last year, 34 days before cases peaked - see Monday's note on wave 2 - watch the VIX - we said this multiple times recently - VIX has been "low energy" and a peak in VIX = market bottom _... Squint, do you see the "inverted" VIX term structure at end of trading on Monday? _Recall, one of our favorite ways to track the VIX is not the "spot" price (that is key also) but rather, the term structure of VIX 4M futures less 1M futures. By the way, in the non-equity world, VIX futures are widely used and traded, so the term structure has tons of signal. - when 4M less 1M is inverted - markets pricing in "near term high volatility event" - usually = bottom for equities At the end of trading Monday (7/19), the VIX term structure (4M futures less 1M) inverted intraday: - the 4M less 1M term structure (TS) inverted intraday - by close 7/19, the TS normalized - a brief but important inversion - Tuesday 7/20, TS steepened This suggests that we saw "peak inversion" Monday and this would be a good argument that equity markets might have bottomed. _... past "peak inversions" associated with end of sell-off aka "market bottoms" _Take a look at the prior 4 VIX TS inversions. There have been 4 instances since August 2020: - peak VIX TS inversion = equity market bottom - Exception: August 2020 had a "punk" signal - August saw stocks fall for another 8 weeks - But Aug-Sept 2020 was during Presidential election season = less valid _... VIX still showing only "low energy" surges _Naturally, the question to ask is whether the VIX has peaked in this current episode. After all, a peak in the VIX is key. The VIX spot peaking and the inversion of the term structure occur contemporaneously. But the TS inversion is a sign to add credibility to shift in direction of the spot VIX: - VIX looks like it was repelled by this trend - albeit, arbitrary trendline Thus, we think odds are high that we have experienced peak panic around the US current surge in Delta variant cases.   _BOTTOM LINE: "July chop" still in play, hence, don't be a hero. But also, supports our view of a setup for a 2H2021 rally _The odds are high that we might have seen the crescendo in market panic -- aka capitulation. That is, the Delta variant has become a risk to the economic recovery story. But as we wrote earlier this week: - we expect Delta to be more "bark than bite" - the sell-off associated with Delta not likely to be a larger 10%-plus drawdown And as noted above, odds are high we saw peak in the panic this week already. That said, our base case remains for July chop. Could this have been the "chop" and now it's "greedy" time? - the S&P 500 touched the 50D moving average - and as shown below, has bounced smartly off that Stocks remain resilient and for multiple reasons, we believe stocks will have a strong 2H2021: - pent-up consumer demand "revenge spend" - pent-up capex, corporate "revenge capex" - pent-up stock buybacks, corporate "revenge buybacks" - dovish Fed, more dovish due to uncertainties of Delta = bullish surprise - scared policymakers due to Delta = more fiscal support - interest rates low due to Delta = risk premia support - scared investors = bad news priced in So you can see multiple reasons for a 2H rally. And we expect this to be led by Epicenter stocks. Our favorite sectors remain: - Energy - Technology - Basic Materials In other words, we believe in reflationary groups and also groups boosting productivity (labor force issues). Hence, Energy, Materials and Technology. The reflationary trades got clobbered due to Delta variant. And once that "bark" mitigates, should results in a sharp rebound in reflationary trades. Where will we be wrong? If Delta proves to be more of a healthcare risk than we realize. And as a result, policymakers will be forced to use blunt tools such as lockdowns. POINT 1: DAILY COVID-19 CASES 33,237, UP +11,344 (EX-FL) VS 7D AGO... 7D DELTA (THE SPEED OF CASE RISE) HAS BEEN CONSTANT OVER THE PAST 9 DAYS... _____________________________ Current Trends -- COVID-19 cases: - Daily cases 33,237 vs 28,318 7D ago, up +4,919 - Daily cases ex-FL&NE 33,237 vs 21,893 7D ago, up +11,344 - 7D positivity rate 5.2% vs 3.5% 7D ago - Hospitalized patients 24,520, up +29% vs 7D ago - Daily deaths 229, down -15% vs 7D ago _____________________________ _*** Florida and Nebraska stopped publishing daily COVID stats updates on 6/4 and 6/30, respectively. We switched to use CDC surveillance data as the substitute. However, since CDC surveillance data is subject to a one-to-two day lag, we added a "US ex-FL&NE" in our daily cases and 7D delta sections in order to demonstrate a more comparable COVID development._ The latest COVID daily cases came in at 33,237, up +11,344 (ex-FL). The daily cases are still rising, but fortunately (at least so far), the cases are not surging parabolically. The 7D delta in daily cases has been flat over the past 9 days. However, the future is uncertain, so that it could rise rapidly. And we believe in order to prevent such a parabolic surge in case figures (and hospitalizations, death toll, too), continued efforts to get more people vaccinated is the key, especially in this "wave of unvaccinated."Currently, TN, OK, AR, SC, AL, MO, and MS are the states with the largest increase in daily cases compared to their recent lows (as shown in the "parabolic" tracker below), and all 7 states have less than 50% of their populations vaccinated with at least one dose. This is consistent with what we wrote before regarding the majority of new cases being amongst unvaccinated individuals, and with what we noted previously, vaccination penetration appears to have some causal relationship with the case trend. Therefore, the COVID developments (both the case and vaccination trends) in these states along with the other low vaccinated states (such as LA, GA, ID, WY, ND, IN) are worth watching.   _7D delta in daily cases has been about 10,000, flat-lined over the past 8 days... _The 7D delta in daily cases now rose to approximately 10,000, but it has flat-lined over the past few days. The good news is the speed of case increase is not parabolic. However, the future is uncertain, so that it could rise rapidly. We will be closely watching this metric. _LOW VACCINATED STATES SEEM TO HAVE A LARGER INCREASE IN DAILY CASES COMPARED TO THEIR RECENT LOW..._ Below, we added a new section called "Parabolic Case Surge Tracker" to monitor the possible parabolic surge in daily case figures. In the table, we included both the vaccine penetration and the recent case trend for 50 US states + DC. The table is sorted by the multiple of their current daily cases divided by their recent low in daily cases. - The states with higher ranks are the states that have seen a more significant rise in daily cases - We also calculated the number of days between now and the recent low date; a state with a high multiple but low number of days since its low means the state is facing a relatively rapid surge in daily cases - The US as a whole, UK, and Israel are also shown at the top as a reference   _CURRENT HOSPITALIZATION AND POSITIVITY RATES ARE RISING... DAILY DEATHS ALSO SEEM TO BE TURNING UPWARDS NOW..._ Below we show the aggregate number of patients hospitalized due to COVID, daily mortality associated with COVID, and the daily positivity rate for COVID. As you can see, hospitalization and daily deaths are relatively low compared to the prior waves. However, with the recent increase in daily cases, current hospitalization is clearly turning upwards, while daily deaths also appear to be turning. Regarding positivity rate, it recently exceeded 5%, which is higher than the positivity rate we observed during the "mini" wave this April and significantly higher than the recent low of <2%. POINT 2: VACCINE: VACCINATION PACE HAS BEEN FLAT OVER THE PAST WEEK... THE EFFORT TO GET MORE PEOPLE FULLY VACCINATED REMAINS THE KEY... _____________________________ CURRENT TRENDS -- VACCINATIONS: - avg 0.5 million this past week vs 0.5 million last week - overall, 48.3% fully vaccinated, 55.7% 1-dose+ received _____________________________ VACCINATION FRONTIER UPDATE --> ALL STATES NOW NEAR OR ABOVE 80% COMBINED PENETRATION (VACCINES + INFECTIONS) Below we sorted the states by the combined penetration (vaccinations + infections). The assumption is that a state with higher combined penetration is likely to be closer to herd immunity, and therefore, less likely to see a parabolic surge in daily cases and deaths. Please note that this "combined penetration" metric can be over 100%, as infected people could also be vaccinated (actually recommended by CDC). - Currently, all states are near or above 80% combined penetration - RI, MA, SD, CT, NJ, IL, NY, DE, NM, UT, PA, ND, AZ, MN, CA, FL are now above 100% combined penetration (vaccines + infections). Again, this metric can be over 100%, as infected people could also be vaccinated. But 100% combined penetration does not mean that the entire population within each state is either infected or vaccinated. Below is a diffusion chart that shows the % of US states (based on state population) that have reached the combined penetration >60%/70%/80%/90%. As you can see, all states have reached 60% and 70% combined vaccination + infection. 96.8% of US states (based on state population) have seen combined infection & vaccination >80% and 65.6% of US states have seen combined infection & vaccination >90%. There were a total of 285,875 doses administered reported on Tuesday. Over the past 7 days, 508,269 doses were administered per day on average, down 4.0% from 7D ago. Over the past 10 days, the vaccination speed has been flat, not fallen. However, compared to mid-April, the current vaccination rate remains low. Admittedly, nearly 2/3 of the US population eligible (age 12+) to receive COVID vaccines have already received at least one dose. For some people among the rest 1/3, the vaccine hesitancy concerns might not easily be reversed. But in order to prevent another parabolic surge in daily cases, hospitalization and fatalities, getting more people fully vaccinated remains the key.   _97.7% of the US has seen 1-dose penetration >40%... _ To better illustrate the actual footprint of the US vaccination effort, we have a time series showing the percent of the US with at least 45%/45%/50% of its residents fully vaccinated, displayed as the orange line on the chart. Currently, 85.8% of US states have seen 40% of their residents fully vaccinated. However, when looking at the percentage of the US with at least 45% of its residents fully vaccinated, this figure is 63.4%. And only 44.5% of US (by state population) have seen 50% of its residents fully vaccinated. - While 97.7% of US states have seen vaccine penetration >40%, 89.1% of them have seen 1 dose penetration >45% and 66.2% of them have seen 1 dose penetration > 50%. - 85.8% of the US has at least 40% of its residents fully vaccinated, However, only 63.4% of US has fully vaccinated >45% and 44.5% of US has fully vaccinated >50%. This is the state by state data below, showing information for individuals with one dose and two doses. The ratio of vaccinations/ daily confirmed cases has been falling significantly (red line is 7D moving avg). Both the surge in daily cases and decrease in daily vaccines administered contributed to this. - the 7D moving average is about ~20 for the past few days - this means 20 vaccines dosed for every 1 confirmed case In total, 337 million vaccine doses have been administered across the country. Specifically, 185 million Americans (56% of US population) have received at least 1 dose of the vaccine. And 160 million Americans (48% of US population) are fully vaccinated.   POINT 3: Tracking restrictions lifting and subsequent effects in individual states Point #3 focuses primarily on tracking the lifting of restrictions, as states have eased the majority of mandates. Keep in mind, easing/lifting restrictions are contingent upon state of emergency ordinances being renewed. - States in groups 1 and 2 represent states that let their emergency ordinances expire, or that never had one in the first place - Note: IL and HI are not listed. This is because restrictions lifting is determined at the county / island level, and no statewide policy will be established to lift restrictions until a full reopening So there is a spectrum of approaches. Our team is listing 3 tiers of states and these are shown below. - states that eased all restrictions in 2020: AK, OK, MO, FL, TN - states that have eased all restrictions in 2021 to now: ND, SD, NE, ID, IA, MT, MS, AZ, SC, WY, TX, GA, AR, KS, WI, IN, AL, UT, NH, LA, NJ, KY, MN, MA, VT, OH, WV, ME, MI, NY, OR, PA, MD, DE - states that are still easing restrictions in 2021: WA, NC, CA, NM, CO, NV, CT, VA, RI, DC GROUP 1: STATES THAT LIFTED RESTRICTIONS IN 2020... The daily case trends in these states are impressive and it is difficult to say that lifting restrictions has actually caused a new wave of cases because the case trends in these states look like other states. GROUP 2: STATES THAT HAVE LIFTED RESTRICTIONS IN 2021 TO NOW... Similar to the list of states above, the daily case trends in these states are impressive and it seems that lifting restrictions hasn’t caused an increase in cases. GROUP 3: STATES THAT ARE STILL EASING RESTRICTIONS IN 2021... These states have begun to lift restrictions, but have yet to ease all restrictions. The date of each state’s most recent restrictions lifting is indicated on each chart. The case trends in these states have been mostly positive. - Easing restrictions appears to have contributed to an increase in cases in several of these states, most drastically in OR, ME, WA, and MN

Is COVID-19 seasonal? "July chop" underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

In short, we just don't think investors need to be a "hero" in July and try to make $$$. It reminds us of a 1974 song by Paper Lace called "Billy don't be a hero" -- a song about a soldier and admonishments not to be a hero in a ferocious battle. That is what this July reminds us of: - COVID-19 cases are surging - Delta variant raising concerns virus is evading vaccines - But our data suggests that COVID-19 might actually be "seasonal" - if so, equity markets bottomed 20 days before "cases peaked" in 2020 Wave 2 - In 2021, cases are surging now and stocks will bottom 3 weeks before cases peak Key question --> when will USA cases peak? Source: Paper Lace, UK _... Is US COVID-19 seasonal? There is a remarkable seasonal pattern... _US COVID-19 cases are surging, stemming from a parabolic surge in Delta variant. Daily cases hit nearly 60,000 today and are on track to reach 100,000 in the next few weeks: - we warned a few weeks ago the US could see a surge in cases patterning after UK/Israel - if we match those nations, cases could surge to 100,000 - cases are not that far from 100,000, surging to 57,633 today _... US IS OUTPERFORMING UK, AS CASE RISE HARDLY MATCHING AMPLITUDE OF UK__ _The reality is the US is tracking better than the UK. As shown below, the US cases are rising and in sync with the rise in UK, but the amplitude is far lower: - UK surge equivalent is USA getting to 200,000 cases - we think this magnitude is possible but so far seems far more linear - future is uncertain - so take our view with a grain of salt _... But there is a strange similarity to 2021 surge versus 2020 _While the delta variant is certainly the primary driver of a surge in USA cases, there seems to be a strange similarity to the surge in 2021 versus 2020. Tireless Ken and team put together some COVID-19 analysis, comparing 2021 to the same date in 2020: - USA cases are turning up on cue - USA hospitalizations similarly are tracking 2020 closely - are the seasonal influences behind this? - "air condition" season in the South - "outdoor season" in the North? - are vaccines mitigating hospitalizations? - this seems to be the case - but cases rising in a seasonal pattern _EVEN LOOKING AT THESE 5 STATES, WE CAN SEE THAT CASES SEEM TO BE SEASONAL_ We looked at 5 states (4 big ones and Alabama with low vax). And the pattern sure seems seasonal/ consistent with 2020: - daily cases are rising in FL/AL consistent with air conditioning season _- NY/CT seem to be following the 2020 pattern _ - TX is the exception, as cases are modestly rising So, perhaps there is a seasonal element to COVID-19? That is, while vaccinations matter, it seems like PCR/detected cases are still following a seasonal pattern. THE GOOD NEWS IS THAT IN THESE 4 STATES, HOSPITALIZATIONS ARE FAR LOWER IN 2020: - more vulnerable are protected via vaccine - presumably vaccines work - perhaps the Delta variant might be less severe - therapeutics are mitigating severity?   _... States with higher vaccination rates are seeing better hospitalization trends in 2021 vs 2020 _Tireless Ken and team looked at seasonal patterns, but made a composite vs 2020: - Top 5 states are seeing relatively better trends in hospitalizations - Bottom 5 states (lowest 5 vaxxed) are seeing a surge in hospitalizations - Top 5 are VT, MA, ME, CT, RI - Bottom 5 are LA, WY, AR, MS, AL There might be some North vs South at work here. After all, it is "air conditioning" season in the bottom 5 states. So these 5 states might be simply reflecting seasonal risk of COVID-19. _STRATEGY: Wave 2 cases peaked July 19, 2020 but equities bottomed 6/15, or 34 days before cases peaked _Given that there may be a "summer seasonal" to COVID-19, we think it is useful to look at how equity and financial markets patterned themselves to COVID-19 Wave 2. Below are some charts and discussion. But on a high level, here is the abstract: - COVID-19 Wave 2 peaked on 7/19/2020 - Wave 2 started 6/17/2020 Date # Days Bottom vs Wave 2 - Wave 2 7/19 N/A - S&P 500 6/15 -34 days - VIX 6/15 -34 - Epicenter 7/9 -10 - 10-yr 8/5 +17 _...S&P 500 IN 2021 WILL BOTTOM LIKELY 30-35 DAYS BEFORE CASES PEAK__ _So, interestingly, stocks and VIX "sniffed" out the 2020 Wave 2 bottom well ahead of cases. And it took Epicenter stocks another 2 weeks. This, is key and instructive. In 2021, COVID-19 cases might surge to 100,000-plus but the S&P 500 will likely peak well ahead of this: - Watch the VIX - it made a "low energy" surge to 25 - if 25 is the best it can peak, the S&P 500 bottomed today We think the tactical bottom in the S&P 500 will be within the next 9 trading days, or before the end of July chop. This is what we are watching. Below is further discussion. _...S&P 500 BOTTOMED ON 6/15/2020, 34 DAYS BEFORE COVID-19 CASES PEAKED__ _Wave 2 started in June 17, 2020 (see below) and did not peak for another 32 days. This is highlighted below: - S&P 500 had a 8% drawdown - Sell-off started 6/8/2020, 9 days before cases surged - S&P 500 decline bottomed 6/15/2020, 7 days later - Stocks bottomed 34 days BEFORE cases peaked The last point is key. We think equities will bottom BEFORE Delta variant cases peak. _... VIX peaked on 6/15/2020, the DAY of S&P 500 BOTTOM _As we have said before, the VIX is key. As shown below, the VIX marked the S&P 500 bottom: - VIX bottomed on 6/5/2020 - this is 12 days before cases surged - this is 3 days before equities peaked - VIX peaked on 6/15/2020 at 44 - VIX peaked same days equities bottomed Watch the VIX. If today's surge to 25 is the peak. The S&P 500 likely bottomed today. _... Epicenter stocks did not bottom until 24 days after the VIX / S&P 500 bottom _As for Epicenter stocks, they did not bottom in 2020 until 24 days after the S&P 500 bottom. This all took place in July: - Epicenter bottomed on 7/9/2020 - this is 24 days after S&P 500 bottom - thus, tactically, Epicenter stocks bottom closer to the bottom of cases In other words, Cyclicals are linked much more closely to case counts. _ __... Interest rates peaked 12 days before cases surged... bottomed 17 days after cases bottomed _In another case of bond markets being ahead of equities: - interest rates peaked 6/5/2020, 12 days before cases surged - cases turned up 6/17 - interest rates bottomed on 8/5/2020 - 17 days after cases peaked So it looks like interest rates sniffed out the surge in cases well ahead of the equity market. But bonds did peak 3 days ahead of equities. POINT 1: DAILY COVID-19 CASES 57,633, UP +22,926 (EX-FL&NE) VS 7D AGO... _____________________________ CURRENT TRENDS -- COVID-19 CASES: - Daily cases 57,633 vs 39,878 7D ago, up +17,755 - Daily cases ex-FL&NE 57,633 vs 34,707 7D ago, up +22,926 - 7D positivity rate 5.3% vs 4.2% 7D ago - Hospitalized patients 23,040, up +30% vs 7D ago - Daily deaths 249, down -5% vs 7D ago _____________________________ _*** Florida and Nebraska stopped publishing daily COVID stats updates on 6/4 and 6/30, respectively. We switched to use CDC surveillance data as the substitute. However, since CDC surveillance data is subject to a one-to-two day lag, we added a "US ex-FL&NE" in our daily cases and 7D delta sections in order to demonstrate a more comparable COVID development._ The latest COVID daily cases came in at 57,633, up +17,755 (ex-FL&NE). We normally see a spike in daily cases each Monday, given that over 2/3 of US states no longer report COVID stats over the weekend. And hence, daily cases on Monday reflect the total new cases over the past three days. That said, the cases are indeed surging across the US, evidenced by the chart below. Considering the delayed data of Florida, the total new cases on Monday would exceed 60,000. In fact, this is the highest level that we have seen since the "mini-wave" in mid-April. The 7D delta has been flat over the past week, which shows that daily cases are not parabolically surging. However, the future is uncertain, so it could rise rapidly. As many states reported, the current wave is essentially a "pandemic of the unvaccinated." Therefore, we believe in order to prevent a parabolic surge in case figures (and both hospitalizations and death toll, too), continued efforts to get more people vaccinated remain the key. Currently, TN, OK, AR, SC, AL, MO, and MS are the states with the largest increase in daily cases compared to their recent lows (as shown in the "parabolic" tracker below), and all 7 states have less than 50% of their populations vaccinated with at least one dose. This is consistent with what we wrote before regarding the majority of new cases being amongst unvaccinated individuals, and with what we noted previously, vaccination penetration appears to have some causal relationship with the case trend. Therefore, the COVID developments (both the case and vaccination trends) in these states along with the other low vaccinated states (such as LA, GA, ID, WY, ND, IN) are worth watching. _7D delta in daily cases has been about 10,000, flat-lined over the past few days... _The 7D delta in daily cases now rose to approximately 10,000, but it has flat-lined over the past few days. The good news is the speed of case increase is not parabolic. However, the future is uncertain, so that it could rise rapidly. We will be closely watching this metric. _LOW VACCINATED STATES SEEM TO HAVE A LARGER INCREASE IN DAILY CASES COMPARED TO THEIR RECENT LOW..._ Below, we added a new section called "Parabolic Case Surge Tracker" to monitor the possible parabolic surge in daily case figures. In the table, we included both the vaccine penetration and the recent case trend for 50 US states + DC. The table is sorted by the multiple of their current daily cases divided by their recent low in daily cases. - The states with higher ranks are the states that have seen a more significant rise in daily cases - We also calculated the number of days between now and the recent low date; a state with a high multiple but low number of days since its low means the state is facing a relatively rapid surge in daily cases - The US as a whole, UK, and Israel are also shown at the top as a reference _CURRENT HOSPITALIZATION AND POSITIVITY RATES ARE RISING... DAILY DEATHS ALSO SEEM TO BE TURNING UPWARDS NOW..._ Below we show the aggregate number of patients hospitalized due to COVID, daily mortality associated with COVID, and the daily positivity rate for COVID. As you can see, hospitalization and daily deaths are relatively low compared to the prior waves. However, with the recent increase in daily cases, current hospitalization is clearly turning upwards, while daily deaths also appear to be turning. Regarding positivity rate, it recently exceeded 5%, which is higher than the positivity rate we observed during the "mini" wave this April and significantly higher than the recent low of <2%. POINT 2: VACCINE: VACCINATION PACE HAS BEEN FLAT OVER THE PAST WEEK... THE EFFORT TO GET MORE PEOPLE FULLY VACCINATED REMAINS THE KEY... _____________________________ CURRENT TRENDS -- VACCINATIONS: - avg 0.5 million this past week vs 0.5 million last week - overall, 48.3% fully vaccinated, 55.7% 1-dose+ received _____________________________ VACCINATION FRONTIER UPDATE --> ALL STATES NOW NEAR OR ABOVE 80% COMBINED PENETRATION (VACCINES + INFECTIONS) Below we sorted the states by the combined penetration (vaccinations + infections). The assumption is that a state with higher combined penetration is likely to be closer to herd immunity, and therefore, less likely to see a parabolic surge in daily cases and deaths. Please note that this "combined penetration" metric can be over 100%, as infected people could also be vaccinated (actually recommended by CDC). - Currently, all states are near or above 80% combined penetration - RI, MA, SD, CT, NJ, IL, NY, DE, NM, UT, PA, ND, AZ, MN, CA, FL are now above 100% combined penetration (vaccines + infections). Again, this metric can be over 100%, as infected people could also be vaccinated. But 100% combined penetration does not mean that the entire population within each state is either infected or vaccinated. Below is a diffusion chart that shows the % of US states (based on state population) that have reached the combined penetration >60%/70%/80%/90%. As you can see, all states have reached 60% and 70% combined vaccination + infection. 96.8% of US states (based on state population) have seen combined infection & vaccination >80% and 65.6% of US states have seen combined infection & vaccination >90%. There were a total of 502,787 doses administered reported on Monday. Over the past 7 days, 515,810 doses were administered per day on average, up 0.7% from 7D ago. Over the past 10 days, the vaccination speed has not been down (essentially flat). It could be that the increasing spread of delta variant and rising case figure caused more people to seek vaccination. However, compared to mid-April, the current vaccination rate remains low. Admittedly, nearly 2/3 of the US population eligible (age 12+) to receive COVID vaccines have already received at least one dose. For some people among the rest 1/3, the vaccine hesitancy concerns might not easily be reversed. More studies on the vaccine's side-effects and its efficiency against the variant, as well as government efforts, could help. We will be closely watching the relevant data. _97.7% of the US has seen 1-dose penetration >40%... _ To better illustrate the actual footprint of the US vaccination effort, we have a time series showing the percent of the US with at least 45%/45%/50% of its residents fully vaccinated, displayed as the orange line on the chart. Currently, 85.8% of US states have seen 40% of their residents fully vaccinated. However, when looking at the percentage of the US with at least 45% of its residents fully vaccinated, this figure is 63.4%. And only 44.5% of US (by state population) have seen 50% of its residents fully vaccinated. - While 97.7% of US states have seen vaccine penetration >40%, 89.1% of them have seen 1 dose penetration >45% and 66.2% of them have seen 1 dose penetration > 50%. - 85.8% of the US has at least 40% of its residents fully vaccinated, However, only 63.4% of US has fully vaccinated >45% and 44.5% of US has fully vaccinated >50%. This is the state by state data below, showing information for individuals with one dose and two doses. The ratio of vaccinations/ daily confirmed cases has been falling significantly (red line is 7D moving avg). Both the surge in daily cases and decrease in daily vaccines administered contributed to this. - the 7D moving average is about ~20 for the past few days - this means 20 vaccines dosed for every 1 confirmed case In total, 336 million vaccine doses have been administered across the country. Specifically, 185 million Americans (56% of US population) have received at least 1 dose of the vaccine. And 160 million Americans (48% of US population) are fully vaccinated. POINT 3: Tracking restrictions lifting and subsequent effects in individual states Point #3 focuses primarily on tracking the lifting of restrictions, as states have eased the majority of mandates. Keep in mind, easing/lifting restrictions are contingent upon state of emergency ordinances being renewed. - States in groups 1 and 2 represent states that let their emergency ordinances expire, or that never had one in the first place - Note: IL and HI are not listed. This is because restrictions lifting is determined at the county / island level, and no statewide policy will be established to lift restrictions until a full reopening So there is a spectrum of approaches. Our team is listing 3 tiers of states and these are shown below. - states that eased all restrictions in 2020: AK, OK, MO, FL, TN - states that have eased all restrictions in 2021 to now: ND, SD, NE, ID, IA, MT, MS, AZ, SC, WY, TX, GA, AR, KS, WI, IN, AL, UT, NH, LA, NJ, KY, MN, MA, VT, OH, WV, ME, MI, NY, OR, PA, MD, DE - states that are still easing restrictions in 2021: WA, NC, CA, NM, CO, NV, CT, VA, RI, DC GROUP 1: STATES THAT LIFTED RESTRICTIONS IN 2020... The daily case trends in these states are impressive and it is difficult to say that lifting restrictions has actually caused a new wave of cases because the case trends in these states look like other states. GROUP 2: STATES THAT HAVE LIFTED RESTRICTIONS IN 2021 TO NOW... Similar to the list of states above, the daily case trends in these states are impressive and it seems that lifting restrictions hasn’t caused an increase in cases. GROUP 3: STATES THAT ARE STILL EASING RESTRICTIONS IN 2021... These states have begun to lift restrictions, but have yet to ease all restrictions. The date of each state’s most recent restrictions lifting is indicated on each chart. The case trends in these states have been mostly positive. - Easing restrictions appears to have contributed to an increase in cases in several of these states, most drastically in OR, ME, WA, and MN

Delta variant sure has a lot of "bark but hardly any bite" -- contributing to July chop, but ultimately creates great setup 2H rally

* Monday * Tuesday * Wednesday * SKIP THURSDAY * Friday STRATEGY: DELTA VARIANT TRIGGERING "JULY CHOP" BUT "BARK WORSE THAN BITE" _... USA cases are rising but not really parabolic, more barely linear _At the moment, the delta variant is causing a rise in USA cases, but this rise is not exactly parabolic. The latest cases figures for USA: - USA cases +28,202 (2.7X vs low) - UK cases +32,385 (17.5X vs low) - Israel case +409 (42.1X vs low) As you can see below, the 7D delta in USA cases are up, but not really gaining that much momentum. The future is uncertain, so it could rise rapidly, but it is modest so far.   _... DELTA VARIANT HAS A LOT OF "BARK", AND IT IS UNNERVING MARKETS_ At the end of June, we had warned that we saw "July chop" coming. We had cited multiple factors at the time, but the three primary drivers were: - Delta variant could lead to a parabolic rise in USA cases to possibly 100,000 --> ~10X to match UK surge - Since 1928, strong 1H, particularly >13% leads to flat/down July, with half instances 3-5% declines - Anecdotally, clients were telling us pundits expected strong July given typical seasonals --> counter-trade consensus And while S&P 500 is actually up 0.7% for July, this belies the violent sector rotations taking place within the broader market. We are at the midpoint of the month, and many of our clients can attest that this been an extremely choppy month. In fact, equity markets have hardly responded to the fundamentally strong 2Q2021 results. _DELTA VARIANT TRIGGERS FEAR OF WAVE 4 --> MORE "BARK THAN BITE"_ But of the 3 factors, the most significant, in my opinion, is the surge in cases associated with the Delta variant. Nations around the world are seeing a parabolic rise in cases. And this raises the specter the world is facing Wave 4 of COVID-19. That is, instead of COVID-19 retreating with the surging penetration of vaccinations, COVID-19 mutations are making this disease more transmissible again. Why would Delta create panic? - Parabolic case rise --> cases tends to be market focus - Low VAX nations --> Australia, Indonesia, Thailand, Japan, etc are forced to use lockdowns - USA Un-vaxxed --> as many as 82 million Americans are not vaxxed/never infected _... IN USA, VULNERABLE POPULATIONS VAXXED, HOSPITALIZATIONS ARE NOT SURGING_ Yes, there are policy dilemmas being created due to the Delta variant spread (there are others too). COVID-19 is a serious health risk, butwe think there are multiple reasons to mitigate our concerns: - the vulnerable populations in the US (and rest of World) have been vaccinated - vaccinated persons have far lower risk of severe outcomes - hospitalizations are hardly tracking the rise in cases --> true in UK, India and USA - Most importantly, India, where the Delta variant first detected, has been able to contain COVID-19 spread The last point is key. If India has seen cases rollover, I think the odds of the USA and rest of World containing the spread from delta variant is quite strong. - if India saw cases peak within 4-6 weeks from initial surge - we expect USA, UK and Israel to see similar trajectories - USA cases likely peak sometime in August _... LITTLE "BITE" FROM DELTA VARIANT IN UK AND ISRAEL EXPERIENCE_ And while it might seem like we are belaboring this point, see how hospitalizations have sharply trailed the rise in COVID-19 cases for both Israel and the UK. - Israel, in fact, has seen a modest rise in cases compared to UK - Israel virtually no rise in hospitalizations   _... IHME model forecasts USA modest rise in hospitalizations, far short of Wave 3 peak of 140,000 _As many of our clients know, we have found the forecasts of the IHME (Institute of Health Metrics) useful. The IHME models are used by policymakers around the world including the White House. Below is their last forecast for hospitalizations: - Hospitalizations forecast to rise to 40,000 by November 2021 - This falls way short of the 140,000 figure seen in January 2021 - But is up from 15,000 in July 2021 The IHME is indeed forecasting more Americans getting hospitalized due to the Delta variant. However, this is hardly matching the surge seen in Wave 3 of COVID-19. And as many recall, the healthcare severity of Wave 3 fell far short of Wave 1 and 2. One reason for this is the USA vaccination made early efforts to target the vulnerable populations: - Elderly Americans - Americans with pre-existing conditions such as obesity, diabetes, and other risk factors In fact, this NY Post article below reminds us that protecting the vulnerable is the most important action. And this effort has been a success in the US. According to the American Diabetes Association: - Diabetics ~40% of USA COVID-19 deaths - Diabetics are 10% of the overall population Hence, the risks of severe outcomes are lower in the USA, simply because of the early vaccine targeting. Source: https://nypost. com/2021/07/16/diabetics-make-up-40-of-covid-deaths-in-us-experts-say/? utm_campaign=iphone_nyp&utm_source=com. slack. slackmdm. share _... USA still has an issue with "unvaxxed Americans" but that is a choice _The tweet from State of Alabama Public Health speaks volumes (see below). - 96% of COVID-19 deaths in past 3.5 months are people not "fully vaccinated" - conversely, vaccinated Alabamans are 4% of deaths in past 3.5 months The unvaxxed are facing substantial risks in USA. I realize this is a choice one makes. But the healthcare risks are high for certain cohorts of America. https://twitter. com/ALPublicHealth/status/1415028491314245635 _STRATEGY: JULY CHOP ULTIMATELY A GREAT SET-UP FOR RISK ASSETS TO RALLY IN 2H2021_ Well, we know that markets will get choppy when COVID-19 cases surge. - That is the first order reaction - Investors fear an echo of past waves - Hence, markets find footing when cases stabilize - Or when markets get "de-sensitized" to cases (not yet) We don't expect this period of chop to lead to a larger 10%-like decline for markets. Sure, a 3%-5% sell-off, even to S&P 500 4,100 is possible. But before one gets too bearish and thinks a large sell-off is underway, consider: - bond spreads stable --> good for stocks - VIX term structure barely impacted --> not signaling broader weakness As noted by JPMorgan US Fixed Income teams, bond spreads (vs Treasuries) have been stable. This is a surprise given the immense chop seen in equity markets in the past two weeks.   And we also highlight the variant signal from the VIX term structure. The VIX term structure (TS) is the spread between VIX 4M contract less 1M contract. This should normally be a positive spread (contango) but when a correction looms, the VIX TS inverts of collapses: - in the past 5 market wobbles - VIX TS collapsed, even went negative - current VIX TS has been very stable the past two weeks (see below) _... Sector rotation into Defensives/Growth --> Energy stocks clobbered in the past week _Still, the shift in sector leadership has been pronounced. Again, a few weeks ago, we warned clients about the possibility that USA COVID-19 cases could surge to 100,000 or more on the heels of the Delta variant. But we have been surprised by the extent of the market rotation: - Epicenter trades like Energy, Basic Materials have been massacred - Healthcare and Real Estate surged in July Thus, investors have made a violent rotation out of Epicenter into Growth. This move has been amplified by the flattish behavior of interest rates.   _SECTOR STRATEGY: Still see 2H2021 being led by Epicenter and FAANG _As violent as this market rotation has been, we do not believe July marks a turn in the overall market leadership. This is a vicious correction and natural risk-off (given COVID-19 surge). For 2H2021, we see leadership from Sectors benefitting from: - "revenge" spending by consumers - "revenge" capex + buybacks by corporates - global economic recovery strengthening as vaccine penetration rises - global confidence recovering as Delta variant wanes - US major infrastructure spending in 2021/2022 - dovish Fed Thinking of the above, this is why we are still overweighting Epicenter stocks and also FAANG. We have written multiple analyses and rationale for this, so we will not belabor this Monday given the already lengthy message we have already written. _ENERGY STOCKS HIT HARDEST, DE-COUPLING FROM OIL_ The most puzzling weakness, in our view, is the crash in Energy stocks. - Energy stocks down -9% in past week - Energy stocks down -13% in the past month - Oil down -4% in the past month Energy stocks will be more volatile than oil, as the Energy stocks reflect additional impacts that are not reflected in the price of oil: - expectations of future conditions - impacts from broader equity market movements - effects from shareholder dynamics --> is the group over-owned or under-owned - company specific factors This is not a complete list, but these factors can cause Energy stocks to de-couple from oil. The magnitude of de-coupling is "eye-popping" - in the past 10 days - Oil is down -4% - Energy stocks down -10% - Oilfield Services down -14% - in the past 18 months - Oil is up +11% - Energy stocks down -19% - Oilfield Services down -29% _... Delta variant "bark" and July chop seems to explain this sell-off _The linkages between Oil and Energy stock have been pretty tight and seemingly diverged sharply in the past two weeks. Energy stocks have been leading equities in 2021 so far, and even with this sell-off, are still the best performing sector YTD up +29%. Given the July chop and the associated de-risking associated with the Delta variant, we think investors are backpedaling on the exposure. This is the predictable result of the surge in Delta variant cases. But as we noted in our earlier discussion, we view this more as a case of bark than bite. Delta variant is not, in our view, going to lead to: - rollback in re-opening - nor reduce the "revenge" activity by households But it is causing investors to get nervous. In our view, this is a set up for very favorable risk rally. I don't think July chop is ending this week. But we would not be selling Epicenter stocks here. Nor do we think Energy stocks are entering a renewed downtrend. Rather, this is a healthy correction after a very strong 1H2021. Tactically speaking, we will be watching for signs of an imminent reversal in the broader markets and within sectors. But the over-arching message, in our view, is: - Delta "bark getting louder" next few weeks - but has little bite _ _POINT 1: DAILY COVID-19 CASES 7,427, UP +2,899 (EX-FL&NE) VS 7D AGO... 7D DELTA HAS BEEN FLAT OVER THE PAST FEW DAYS... _____________________________ CURRENT TRENDS -- COVID-19 CASES: - Daily cases 7,427 vs 9,698 7D ago, down -2,271 - Daily cases ex-FL&NE 7,427 vs 4,528 7D ago, up +2,899 - 7D positivity rate 5.2% vs 4.1% 7D ago - Hospitalized patients 21,931, up +28% vs 7D ago - Daily deaths 258, up +15% vs 7D ago _____________________________ _*** Florida and Nebraska stopped publishing daily COVID stats updates on 6/4 and 6/30, respectively. We switched to use CDC surveillance data as the substitute. However, since CDC surveillance data is subject to a one-to-two day lag, we added a "US ex-FL&NE" in our daily cases and 7D delta sections in order to demonstrate a more comparable COVID development._ On Sunday, 13 states and Puerto Rico reported a total of 7,427 new cases. The majority of these states and PR reported higher daily cases than 7D ago. The case figure is climbing at a constant rate now - 7D avg of 7D delta in daily cases has been stable at ~10,000. However, 10,000 still means the case figure could exceed 50,000 in two weeks.   The other metrics such as Current Hospitalization and Positivity rate are also rising. Although current hospitalization remains relatively low compared to prior waves, it has been apparently turning upwards recently. The positivity rate is also rising rapidly, and now over 5%. Daily deaths have been flat over the past 1-2 weeks. As we noted before, we believe vaccine penetration could be the key to prevent COVID mortality. And with high vaccine penetration among the elderly population, the death trend might not follow the case trend even if the cases are surging. Currently, TN, OK, AR, AL, MO, VT, SC, and, NV are the states with the largest increase in daily cases compared to their recent lows (as shown in the "parabolic" tracker below), and all 8 states except VT and NV have less than 50% of their populations vaccinated with at least one dose. This is consistent with what we wrote before regarding the majority of new cases being amongst unvaccinated individuals, and with what we noted previously, vaccination penetration appears to have some causal relationship with the case trend. Therefore, the COVID developments (both the case and vaccination trends) in these states along with the other low vaccinated states (such as MS, LA, GA, ID, WY, ND, IN) are worth watching.   _7D delta in daily cases has been about 10,000, flat-lined over the past few days... _The 7D delta in daily cases now rose to approximately 10,000, but it has flat-lined over the past few days. The good news is the speed of case increase is not parabolic. However, it still implies that the case figure could exceed 50,000 in two weeks. _LOW VACCINATED STATES SEEM TO HAVE A LARGER INCREASE IN DAILY CASES COMPARED TO THEIR RECENT LOW..._ Below, we added a new section called "Parabolic Case Surge Tracker" to monitor the possible parabolic surge in daily case figures. In the table, we included both the vaccine penetration and the recent case trend for 50 US states + DC. The table is sorted by the multiple of their current daily cases divided by their recent low in daily cases. - The states with higher ranks are the states that have seen a more significant rise in daily cases - We also calculated the number of days between now and the recent low date; a state with a high multiple but low number of days since its low means the state is facing a relatively rapid surge in daily cases - The US as a whole, UK, and Israel are also shown at the top as a reference   _CURRENT HOSPITALIZATION AND POSITIVITY RATES ARE RISING... DAILY DEATHS ALSO SEEM TO BE TURNING UPWARDS NOW..._ Below we show the aggregate number of patients hospitalized due to COVID, daily mortality associated with COVID, and the daily positivity rate for COVID. As you can see, hospitalization and daily deaths are relatively low compared to the prior waves. However, with the recent increase in daily cases, current hospitalization is clearly turning upwards, while daily deaths also appear to be turning. Regarding positivity rate, it recently exceeded 5%, which is higher than the positivity rate we observed during the "mini" wave this April and significantly higher than the recent low of <2%. POINT 2: VACCINE: VACCINATION PACE HAS BEEN FLAT OVER THE PAST WEEK... THE EFFORT TO GET MORE PEOPLE FULLY VACCINATED REMAINS THE KEY... _____________________________ CURRENT TRENDS -- VACCINATIONS: - avg 0.5 million this past week vs 0.5 million last week - overall, 48.2% fully vaccinated, 55.6% 1-dose+ received _____________________________ VACCINATION FRONTIER UPDATE --> ALL STATES NOW NEAR OR ABOVE 80% COMBINED PENETRATION (VACCINES + INFECTIONS) Below we sorted the states by the combined penetration (vaccinations + infections). The assumption is that a state with higher combined penetration is likely to be closer to herd immunity, and therefore, less likely to see a parabolic surge in daily cases and deaths. Please note that this "combined penetration" metric can be over 100%, as infected people could also be vaccinated (actually recommended by CDC). - Currently, all states are near or above 80% combined penetration - RI, MA, SD, CT, NJ, IL, NY, DE, NM, UT, PA, ND, AZ, MN, CA, FL are now above 100% combined penetration (vaccines + infections). Again, this metric can be over 100%, as infected people could also be vaccinated. But 100% combined penetration does not mean that the entire population within each state is either infected or vaccinated. Below is a diffusion chart that shows the % of US states (based on state population) that have reached the combined penetration >60%/70%/80%/90%. As you can see, all states have reached 60% and 70% combined vaccination + infection. 95.5% of US states (based on state population) have seen combined infection & vaccination >80% and 65.6% of US states have seen combined infection & vaccination >90%.   There were a total of 496,608 doses administered reported on Sunday. Over the past 7 days, 507,474 doses were administered per day on average, up 0.7% from 7D ago. The vaccination speed has been flat over the past 10 days, as shown in the chart below. The overall vaccination trend has been sliding down since mid-April.   As the more transmissible Delta variant gradually becomes the dominant strain in the US, vaccinations could not only provide some degree of protection against the virus but are also likely to reduce virus transmission. As many media sources have reported, the majority of new infections in some regions (LA County, Mississippi) are amongst the people who were not fully vaccinated. Therefore, it would be a good sign if we start to see the number of vaccines administered rise. However, we understand that vaccine hesitancy concerns might not easily be reversed. More studies on the vaccine's side-effects and its efficiency against the variant, as well as government efforts, are key. We will be closely watching the relevant data.   _97.7% of the US has seen 1-dose penetration >40%... _ To better illustrate the actual footprint of the US vaccination effort, we have a time series showing the percent of the US with at least 45%/45%/50% of its residents fully vaccinated, displayed as the orange line on the chart. Currently, 85.8% of US states have seen 40% of their residents fully vaccinated. However, when looking at the percentage of the US with at least 45% of its residents fully vaccinated, this figure is 63.4%. And only 44.5% of US (by state population) have seen 50% of its residents fully vaccinated. - While 97.7% of US states have seen vaccine penetration >40%, 89.1% of them have seen 1 dose penetration >45% and 66.2% of them have seen 1 dose penetration > 50%. - 85.8% of the US has at least 40% of its residents fully vaccinated, However, only 63.4% of US has fully vaccinated >45% and 44.5% of US has fully vaccinated >50%. This is the state by state data below, showing information for individuals with one dose and two doses. The ratio of vaccinations/ daily confirmed cases has been falling significantly (red line is 7D moving avg). Both the surge in daily cases and decrease in daily vaccines administered contributed to this. - the 7D moving average is about ~20 for the past few days - this means 20 vaccines dosed for every 1 confirmed case In total, 333 million vaccine doses have been administered across the country. Specifically, 184 million Americans (56% of US population) have received at least 1 dose of the vaccine. And 160 million Americans (48% of US population) are fully vaccinated.   POINT 3: Tracking restrictions lifting and subsequent effects in individual states Point #3 focuses primarily on tracking the lifting of restrictions, as states have eased the majority of mandates. Keep in mind, easing/lifting restrictions are contingent upon state of emergency ordinances being renewed. - States in groups 1 and 2 represent states that let their emergency ordinances expire, or that never had one in the first place - Note: IL and HI are not listed. This is because restrictions lifting is determined at the county / island level, and no statewide policy will be established to lift restrictions until a full reopening So there is a spectrum of approaches. Our team is listing 3 tiers of states and these are shown below. - states that eased all restrictions in 2020: AK, OK, MO, FL, TN - states that have eased all restrictions in 2021 to now: ND, SD, NE, ID, IA, MT, MS, AZ, SC, WY, TX, GA, AR, KS, WI, IN, AL, UT, NH, LA, NJ, KY, MN, MA, VT, OH, WV, ME, MI, NY, OR, PA, MD, DE - states that are still easing restrictions in 2021: WA, NC, CA, NM, CO, NV, CT, VA, RI, DC GROUP 1: STATES THAT LIFTED RESTRICTIONS IN 2020... The daily case trends in these states are impressive and it is difficult to say that lifting restrictions has actually caused a new wave of cases because the case trends in these states look like other states. GROUP 2: STATES THAT HAVE LIFTED RESTRICTIONS IN 2021 TO NOW... Similar to the list of states above, the daily case trends in these states are impressive and it seems that lifting restrictions hasn’t caused an increase in cases. GROUP 3: STATES THAT ARE STILL EASING RESTRICTIONS IN 2021... These states have begun to lift restrictions, but have yet to ease all restrictions. The date of each state’s most recent restrictions lifting is indicated on each chart. The case trends in these states have been mostly positive. - Easing restrictions appears to have contributed to an increase in cases in several of these states, most drastically in OR, ME, WA, and MN    

Daily cases ex-FL at 28,517 (+10,299 vs. 7D ago), daily vaccinations at 563,632 (-127,426 vs. 7D ago)

  Source: https://www. cnbc. com/2021/07/14/delta-ceo-says-delta-covid-variant-has-had-no-impact-on-bookings. html Source: https://www. cnbc. com/2021/07/13/norwegian-cruise-line-sues-florida-surgeon-general-to-end-vaccine-passport-ban-. html POINT 1: DAILY COVID-19 CASES 28,517, UP +10,299 (EX-FL) VS 7D AGO... POSITIVITY RATE (7D AVG) NOW OVER 5%... _____________________________ Current Trends -- COVID-19 cases: - Daily cases 28,517 vs 23,058 7D ago, up +5,459 - Daily cases ex-FL 28,517 vs 18,218 7D ago, up +10,299 - 7D positivity rate 5.1% vs 3.3% 7D ago - Hospitalized patients 19,327, up +20% vs 7D ago - Daily deaths 266, up +22% vs 7D ago _____________________________ _*** Florida and Nebraska stopped publishing daily COVID stats updates on 6/4 and 6/30, respectively. We switched to use CDC surveillance data as the substitute. However, since CDC surveillance data is subject to a one-to-two day lag, we added a "US ex-FL&NE" in our daily cases and 7D delta sections in order to demonstrate a more comparable COVID development._ The latest COVID daily cases (ex-FL) came in at 28,517, up +10,299. As shown in the chart below, cases have been rapidly surging over the past 4 weeks, and it seems like the rate of this increase is accelerating. Currently, the 7D delta in daily cases is approximately 10,000, which means the case figure could exceed 50,000 in two weeks. Although there has not been any comprehensive study on the composition of the recent new infections, quite a few media sources have reported that the vast majority of recent new cases has been amongst unvaccinated individuals (i.e. LA County and Mississippi). Therefore, the effort to push more people to get vaccinated remains key. The good news is that according to the CDC, 88.9% of age 65+ population received at least one dose of the vaccine, and 79.3% are fully vaccinated. And we know the elder population is more vulnerable to the disease compared to younger individuals. Hence, even though cases are surging, the death toll might not follow the case trend. Currently, TN, OK, AR, AL, MO, SC, and, NV are the states with the largest increase in daily cases compared to their recent lows (as shown in the "parabolic" tracker below), while all 7 states except NV have less than 50% of their populations vaccinated with at least one dose. This is consistent with what we mentioned above regarding the majority of new cases being amongst unvaccinated individuals, and with what we noted previously, vaccination penetration appears to have some causal relationship with the case trend. Therefore, the COVID developments (both the case and vaccination trends) in these states along with the other low vaccinated states (such as MS, LA, GA, ID, WY, ND, IN) are worth watching. _7D delta in daily cases has been about 10,000, flat-lined over the past few days... _The 7D delta in daily cases now rose to approximately 10,000, but it has flat-lined over the past few days. Current speed of case increase implies that the case figure could exceed 50,000 in two weeks. _LOW VACCINATED STATES SEEM TO HAVE A LARGER INCREASE IN DAILY CASES COMPARED TO THEIR RECENT LOW..._ Below, we added a new section called "Parabolic Case Surge Tracker" to monitor the possible parabolic surge in daily case figures. In the table, we included both the vaccine penetration and the recent case trend for 50 US states + DC. The table is sorted by the multiple of their current daily cases divided by their recent low in daily cases. - The states with higher ranks are the states that have seen a more significant rise in daily cases - We also calculated the number of days between now and the recent low date; a state with a high multiple but low number of days since its low means the state is facing a relatively rapid surge in daily cases - The US as a whole, UK, and Israel are also shown at the top as a reference _CURRENT HOSPITALIZATION AND POSITIVITY RATES ARE RISING... DAILY DEATHS ALSO SEEM TO BE TURNING UPWARDS NOW..._ Below we show the aggregate number of patients hospitalized due to COVID, daily mortality associated with COVID, and the daily positivity rate for COVID. As you can see, hospitalization and daily deaths are relatively low compared to the prior waves. However, with the recent increase in daily cases, current hospitalization is clearly turning upwards, while daily deaths also appear to be turning. Regarding positivity rate, it recently exceeded 5%, which is higher than the positivity rate we observed during the "mini" wave this April and significantly higher than the recent low of <2%. POINT 2: VACCINE: VACCINATION PACE IS NOT IMPROVING AMID THE RISING CASE FIGURE... CURRENTLY HALF MILLION DOSES ARE ADMINISTERED DAILY... _____________________________ CURRENT TRENDS -- VACCINATIONS: - avg 0.5 million this past week vs 0.6 million last week - overall, 48.0% fully vaccinated, 55.3% 1-dose+ received _____________________________ VACCINATION FRONTIER UPDATE --> ALL STATES NOW NEAR OR ABOVE 80% COMBINED PENETRATION (VACCINES + INFECTIONS) Below we sorted the states by the combined penetration (vaccinations + infections). The assumption is that a state with higher combined penetration is likely to be closer to herd immunity, and therefore, less likely to see a parabolic surge in daily cases and deaths. Please note that this "combined penetration" metric can be over 100%, as infected people could also be vaccinated (actually recommended by CDC). - Currently, all states are near or above 80% combined penetration - RI, MA, SD, CT, NJ, IL, NY, DE, NM, UT, PA, ND, AZ, MN, CA, FL are now above 100% combined penetration (vaccines + infections). Again, this metric can be over 100%, as infected people could also be vaccinated. But 100% combined penetration does not mean that the entire population within each state is either infected or vaccinated. Below is a diffusion chart that shows the % of US states (based on state population) that have reached the combined penetration >60%/70%/80%/90%. As you can see, all states have reached 60% and 70% combined vaccination + infection. 95.5% of US states (based on state population) have seen combined infection & vaccination >80% and 65.6% of US states have seen combined infection & vaccination >90%. There were a total of 563,632 doses administered reported on Thursday. Over the past 7 days, 526,174 doses were administered per day on average, down 12% from 7D ago. The vaccination speed has not improved even though cases are surging and vaccination seems to help against the variant. The overall vaccination trend has been sliding down over the past 3 months. As the more transmissible Delta variant gradually becomes the dominant strain in the US, vaccinations could not only provide some degree of protection against the virus but are also likely to reduce virus transmission. As many media sources have reported, the majority of new infections in some regions (LA County, Mississippi) are amongst the unvaccinated people. Therefore, it would be a good sign if we start to see the number of vaccines administered rise. However, we understand that vaccine hesitancy concerns might not easily be reversed. More studies on the vaccine's side-effects and its efficiency against the variant, as well as government efforts, are key. We will be closely watching the relevant data. _97.7% of the US has seen 1-dose penetration >40%... _ To better illustrate the actual footprint of the US vaccination effort, we have a time series showing the percent of the US with at least 45%/45%/50% of its residents fully vaccinated, displayed as the orange line on the chart. Currently, 83.9% of US states have seen 40% of their residents fully vaccinated. However, when looking at the percentage of the US with at least 45% of its residents fully vaccinated, this figure is 63.1%. And only 44.5% of US (by state population) have seen 50% of its residents fully vaccinated. - While 97.7% of US states have seen vaccine penetration >40%, 89.1% of them have seen 1 dose penetration >45% and 66.2% of them have seen 1 dose penetration > 50%. - 83.09% of the US has at least 40% of its residents fully vaccinated, However, only 63.1% of US has fully vaccinated >45% and 44.5% of US has fully vaccinated >50%. This is the state by state data below, showing information for individuals with one dose and two doses. The ratio of vaccinations/ daily confirmed cases has been falling significantly (red line is 7D moving avg). Both the surge in daily cases and decrease in daily vaccines administered contributed to this. - the 7D moving average is about ~30 for the past few days - this means 30 vaccines dosed for every 1 confirmed case In total, 333 million vaccine doses have been administered across the country. Specifically, 184 million Americans (55% of US population) have received at least 1 dose of the vaccine. And 159 million Americans (48% of US population) are fully vaccinated. POINT 3: Tracking restrictions lifting and subsequent effects in individual states Point #3 focuses primarily on tracking the lifting of restrictions, as states have eased the majority of mandates. Keep in mind, easing/lifting restrictions are contingent upon state of emergency ordinances being renewed. - States in groups 1 and 2 represent states that let their emergency ordinances expire, or that never had one in the first place - Note: IL and HI are not listed. This is because restrictions lifting is determined at the county / island level, and no statewide policy will be established to lift restrictions until a full reopening So there is a spectrum of approaches. Our team is listing 3 tiers of states and these are shown below. - states that eased all restrictions in 2020: AK, OK, MO, FL, TN - states that have eased all restrictions in 2021 to now: ND, SD, NE, ID, IA, MT, MS, AZ, SC, WY, TX, GA, AR, KS, WI, IN, AL, UT, NH, LA, NJ, KY, MN, MA, VT, OH, WV, ME, MI, NY, OR, PA, MD, DE - states that are still easing restrictions in 2021: WA, NC, CA, NM, CO, NV, CT, VA, RI, DC GROUP 1: STATES THAT LIFTED RESTRICTIONS IN 2020... The daily case trends in these states are impressive and it is difficult to say that lifting restrictions has actually caused a new wave of cases because the case trends in these states look like other states. GROUP 2: STATES THAT HAVE LIFTED RESTRICTIONS IN 2021 TO NOW... Similar to the list of states above, the daily case trends in these states are impressive and it seems that lifting restrictions hasn’t caused an increase in cases. GROUP 3: STATES THAT ARE STILL EASING RESTRICTIONS IN 2021... These states have begun to lift restrictions, but have yet to ease all restrictions. The date of each state’s most recent restrictions lifting is indicated on each chart. The case trends in these states have been mostly positive. - Easing restrictions appears to have contributed to an increase in cases in several of these states, most drastically in OR, ME, WA, and MN

Daily cases at 21,922 (-4,069 vs. 7D ago, but 7D delta is distorted due to holiday), daily vaccinations at 338,666 (+120,490 vs. 7D ago)

  EYE-CATCHING COVID HEADLINES _12% OF US WHO RECEIVED THEIR FIRST DOSE MISSED SECOND DOSE OF VACCINE; EFFICACY MORE THAN DOUBLES AFTER RECEIVING BOTH DOSES..._ The below article caught my eye Tuesday. According to the article, roughly 12% (up from 8% seen earlier this year) of the US population who were eligible for a second dose (in other words, they received their first dose) had missed their second dose of the vaccine, either Moderna or Pfizer. This 12% adds up to nearly 15 million people who have not received their second shot. WOW! This study shows that vaccine hesitancy is intensified which could also partially explain the stalled vaccination rate recently. As a reference, the article also cited a study that found that the efficacy of the Pfizer vaccine against the Delta variant could jump from 33% with the first dose to 88% with the second does. This demonstrates the importance of being fully vaccinated - efficacy more than doubles after receiving both doses. _THE COVID DEVELOPMENTS IN UK AND FRANCE ARE WORTH WATCHING..._ After PM Boris Johnson revealed his five-point plan for the country to "live with COVID" last week, he confirmed on Monday that England will lift COVID restrictions on July 19 as planned amid the surging cases. In contrast, France is mandating all health workers be vaccinated by September 15; after July 15th, proof of a negative COVID test or a vaccinated passport is needed to access bars, theaters, festivals, and long distance trains. UK COVID cases have been surging since mid May, up from a recent low of 1,855 on 5/19 to 32,385. France COVID cases have been rising as well, but only up from the recent low of 1,840 on 6/27 to 3,853. Hence, the reaction from both governments is interesting and the following developments are worth watching. Besides, the UK's COVID development is especially important to the US as both countries have a relatively higher vaccination rate and the Delta variant is now the dominant strain in both countries. The case/hospitalization/death trend in the UK could give us more insights on the severity of the Delta variant. POINT 1: DAILY COVID-19 CASES 21,922, DOWN -4,069 (EX-FL&NE) VS 7D AGO... 7D DELTA IS DISTORTED BUT CASES ARE INDEED RISING _____________________________ Current Trends -- COVID-19 cases: - Daily cases 21,922 vs 28,266 7D ago, down -6,344 - Daily cases ex-FL&NE 21,844 vs 25,913 7D ago, down -4,069 - 7D positivity rate 4.7% vs 2.8% 7D ago - Hospitalized patients 18,202, up +21% vs 7D ago - Daily deaths 286, up +36% vs 7D ago _____________________________ _*** Florida and Nebraska stopped publishing daily COVID stats updates on 6/4 and 6/30, respectively. We switched to use CDC surveillance data as the substitute. However, since CDC surveillance data is subject to a one-to-two day lag, we added a "US ex-FL&NE" in our daily cases and 7D delta sections in order to demonstrate a more comparable COVID development._ The latest COVID daily cases came in at 21,922, down -4,069 (ex-FL&NE). The 7D delta in daily cases became negative on Tuesday after yesterday's spike - but this is also a result of the over-reporting last Tuesday following Independence Day. Overall, case trend, hospitalization, and positivity rate are all rising rapidly. Moreover, daily deaths also seem to edge up Tuesday. But as we noted yesterday, with nearly 80% of elder population (age 65+) and nearly 50% of the total population fully vaccinated, the death toll might not follow the same pattern as the case trend if the vaccines are efficient to a certain degree against the variant. Currently, TN, OK, AR, SC, NV, AL, and NC are the states with the largest increase in daily cases compared to their recent lows (as shown in the "parabolic" tracker below), while all 7 states except NV have less than 50% of their populations vaccinated with at least one dose. As we noted previously, vaccine penetration appears to have some causal relationship with the case trend. Therefore, the COVID developments in these states along with the other low vaccinated states (such as MS, LA, GA, ID, WY, ND, IN) are worth watching. _7D delta in daily cases fell to negative... _The 7D delta in daily cases fell significantly on Tuesday, but this is primarily due to the under-reporting 7D ago on Independence Day. That said, daily cases are indeed rising at a faster rate. The 7D avg (blue dash line) provides us with a better view of the trend, and as you can see, the 7D delta has been gradually rising over the past two weeks. But the good news is the rise is more "linear" and less" parabolic." However, it is still too early to conclude whether or not the US will see a parabolic surge in daily cases. We will be closely watching the relevant data. _NEW CASE SURGE TRACKER IN ORDER TO IDENTIFY THE STATES THAT HAVE SEEN THE LARGEST CASE SURGE RECENTLY._ Below, we added a new section called "Parabolic Case Surge Tracker" to monitor the possible parabolic surge in daily case figures. In the table, we included both the vaccine penetration and the recent case trend for 50 US states + DC. The table is sorted by the multiple of their current daily cases divided by their recent low in daily cases. - The states with higher ranks are the states that have seen a more significant rise in daily cases - We also calculated the number of days between now and the recent low date; a state with a high multiple but low number of days since its low means the state is facing a relatively rapid surge in daily cases - The US as a whole, UK, and Israel are also shown at the top as a reference _CURRENT HOSPITALIZATION AND POSITIVITY RATE ARE RISING WHILE DAILY DEATHS CONTINUE TO FALL..._ Below we show the aggregate number of patients hospitalized due to COVID, daily mortality associated with COVID, and the daily positivity rate for COVID. As you can see, all three metrics are at their all-time lows since the start of the pandemic. However, current hospitalization and positivity rate are clearly turning upwards, while daily deaths remain on a downtrend. If the COVID related hospitalizations continue to rise, we could see the daily deaths start to turn upwards soon. POINT 2: VACCINE: VACCINATION DATA COULD "TRUE UP" THIS WEEK AFTER THE DATA DISTORTION DUE TO INDEPENDENCE DAY _____________________________ CURRENT TRENDS -- VACCINATIONS: - avg 0.5 million this past week vs 0.9 million last week - overall, 47.8% fully vaccinated, 55.1% 1-dose+ received _____________________________ VACCINATION FRONTIER UPDATE --> ALL STATES NOW NEAR OR ABOVE 80% COMBINED PENETRATION (VACCINES + INFECTIONS) Below we sorted the states by the combined penetration (vaccinations + infections). The assumption is that a state with higher combined penetration is likely to be closer to herd immunity, and therefore, less likely to see a parabolic surge in daily cases and deaths. Please note that this "combined penetration" metric can be over 100%, as infected people could also be vaccinated (actually recommended by CDC). - Currently, all states are near or above 80% combined penetration - RI, MA, SD, CT, NJ, IL, NY, DE, NM, UT, PA, ND, AZ, MN, CA, FL are now above 100% combined penetration (vaccines + infections). Again, this metric can be over 100%, as infected people could also be vaccinated. But 100% combined penetration does not mean that the entire population within each state is either infected or vaccinated. Below is a diffusion chart that shows the % of US states (based on state population) that have reached the combined penetration >60%/70%/80%/90%. As you can see, all states have reached 60% and 70% combined vaccination + infection. 95.5% of US states (based on state population) have seen combined infection & vaccination >80% and 65.6% of US states have seen combined infection & vaccination >90%. There were a total of 338,666 doses administered reported on Sunday. Over the past 7 days, 529,189 doses were administered per day on average, down 39% from 7D ago. The daily number of vaccines administered is likely to catch up after the under-reporting last week due to Independence Day. However, the overall vaccination trend has been sliding down over the past 3 months. As the more transmissible Delta variant gradually becomes the dominant strain in the US, vaccinations could not only provide some degree of protection against the virus but are also likely to reduce virus transmission. Therefore, we might see the vaccination trend start to turn upwards. However, we understand that the vaccine hesitancy might not that easy to be eased. More studies on the vaccine's side-effect and efficiency against the variant as well as government efforts are the key. We will be closely watching the relevant data. _97.7% of the US has seen 1-dose penetration >40%... _ To better illustrate the actual footprint of the US vaccination effort, we have a time series showing the percent of the US with at least 45%/45%/50% of its residents fully vaccinated, displayed as the orange line on the chart. Currently, 83.0% of US states have seen 40% of their residents fully vaccinated. However, when looking at the percentage of the US with at least 45% of its residents fully vaccinated, this figure is 63.1%. And only 44.5% of US (by state population) have seen 50% of its residents fully vaccinated. -While 97.7% of US states have seen vaccine penetration >40%, 89.1% of them have seen 1 dose penetration >45% and 64.3% of them have seen 1 dose penetration > 50%. -83.0% of the US has at least 40% of its residents fully vaccinated, However, only 63.1% of US has fully vaccinated >45% and 44.5% of US has fully vaccinated >50%. This is the state by state data below, showing information for individuals with one dose and two doses. The ratio of vaccinations/ daily confirmed cases has been falling significantly (red line is 7D moving avg). Both the surge in daily cases and decrease in daily vaccines administered contributed to this. - the 7D moving average is about ~30 for the past few days - this means 30 vaccines dosed for every 1 confirmed case In total, 333 million vaccine doses have been administered across the country. Specifically, 183 million Americans (55% of US population) have received at least 1 dose of the vaccine. And 158 million Americans (48% of US population) are fully vaccinated. POINT 3: Tracking restrictions lifting and subsequent effects in individual states Point #3 focuses primarily on tracking the lifting of restrictions, as states have eased the majority of mandates. Keep in mind, easing/lifting restrictions are contingent upon state of emergency ordinances being renewed. - States in groups 1 and 2 represent states that let their emergency ordinances expire, or that never had one in the first place - Note: IL and HI are not listed. This is because restrictions lifting is determined at the county / island level, and no statewide policy will be established to lift restrictions until a full reopening So there is a spectrum of approaches. Our team is listing 3 tiers of states and these are shown below. - states that eased all restrictions in 2020: AK, OK, MO, FL, TN - states that have eased all restrictions in 2021 to now: ND, SD, NE, ID, IA, MT, MS, AZ, SC, WY, TX, GA, AR, KS, WI, IN, AL, UT, NH, LA, NJ, KY, MN, MA, VT, OH, WV, ME, MI, NY, OR, PA, MD, DE - states that are still easing restrictions in 2021: WA, NC, CA, NM, CO, NV, CT, VA, RI, DC GROUP 1: STATES THAT LIFTED RESTRICTIONS IN 2020... The daily case trends in these states are impressive and it is difficult to say that lifting restrictions has actually caused a new wave of cases because the case trends in these states look like other states. GROUP 2: STATES THAT HAVE LIFTED RESTRICTIONS IN 2021 TO NOW... Similar to the list of states above, the daily case trends in these states are impressive and it seems that lifting restrictions hasn’t caused an increase in cases. GROUP 3: STATES THAT ARE STILL EASING RESTRICTIONS IN 2021... These states have begun to lift restrictions, but have yet to ease all restrictions. The date of each state’s most recent restrictions lifting is indicated on each chart. The case trends in these states have been mostly positive. - Easing restrictions appears to have contributed to an increase in cases in several of these states, most drastically in OR, ME, WA, and MN

Daily cases at 34,489 (+31,721 vs. 7D ago, but 7D ago was underreported due to holiday), daily vaccinations at 444,433 (+56,750 vs. 7D ago)

POINT 1: Daily COVID-19 cases 34,489, up +31,721 (ex-FL&NE) vs 7D ago... 7D delta is distorted but cases are indeed rising _____________________________ Current Trends -- COVID-19 cases: - Daily cases 34,489 vs 5,116 7D ago, up +29,373 - Daily cases ex-FL&NE 34,489 vs 2,768 7D ago, up +31,721 - 7D positivity rate 3.5% vs 2.9% 7D ago - Hospitalized patients 17147, up +19% vs 7D ago - Daily deaths 254, up +22% vs 7D ago _____________________________ *** Florida and Nebraska stopped publishing daily COVID stats updates on 6/4 and 6/30, respectively. We switched to use CDC surveillance data as the substitute. However, since CDC surveillance data is subject to a one-to-two day lag, we added a "US ex-FL&NE" in our daily cases and 7D delta sections in order to demonstrate a more comparable COVID development. The latest COVID daily cases came in at 34,489, up +31,721 (ex-FL&NE). Since over 2/3 of US states no longer report COVID stats over the weekend, daily cases tend to spike on Monday; this results in daily cases reflecting the total new cases over the past three days. That said, there is no doubt the cases are surging across the US. As shown in the chart below, Monday's cases have been up from 15,000 two weeks ago to now over 35,000 (and if including the delayed FL data, daily cases on Monday is likely to be over 37,000). Could the case figure rise to 100,000 again? The future is uncertain, and anything is possible. But this time vaccines are the biggest differentiator, especially given nearly 80% of the elder population (age 65+) is fully vaccinated. Hence, if the vaccines are efficient to a certain degree against the variant, the death toll might not follow the same pattern even if the cases surge dramatically. Currently, TN, OK, AR, SC, NV, AL, and NC are the states with the largest increase in daily cases compared to their recent lows (as shown in the "parabolic" tracker below), while all 7 states except NV have less than 50% of their populations vaccinated with at least one dose. As we noted previously, vaccine penetration appears to have some causal relationship with the case trend. Therefore, the COVID developments in these states along with the other low vaccinated states (such as MS, LA, GA, ID, WY, ND, IN) are worth watching. _7D delta in daily cases jumped on Monday due to Independence Day 7D ago... _The 7D delta in daily cases jumped significantly on Monday, but this is primarily due to the under-reporting 7D ago on Independence Day. That said, daily cases are indeed rising at a faster rate. The 7D avg (blue dash line) provides us with a better view of the trend, and as you can see, the 7D delta has been gradually rising over the past two weeks. But the good news is the rise is more "linear" and less" parabolic." However, it is still too early to conclude whether or not the US will see a parabolic surge in daily cases. We will be closely watching the relevant data. _NEW CASE SURGE TRACKER IN ORDER TO IDENTIFY THE STATES THAT HAVE SEEN THE LARGEST CASE SURGE RECENTLY._ Below, we added a new section called "Parabolic Case Surge Tracker" to monitor the possible parabolic surge in daily case figures. In the table, we included both the vaccine penetration and the recent case trend for 50 US states + DC. The table is sorted by the multiple of their current daily cases divided by their recent low in daily cases. - The states with higher ranks are the states that have seen a more significant rise in daily cases - We also calculated the number of days between now and the recent low date; a state with a high multiple but low number of days since its low means the state is facing a relatively rapid surge in daily cases - The US as a whole, UK, and Israel are also shown at the top as a reference _CURRENT HOSPITALIZATION AND POSITIVITY RATE ARE RISING WHILE DAILY DEATHS CONTINUE TO FALL..._ Below we show the aggregate number of patients hospitalized due to COVID, daily mortality associated with COVID, and the daily positivity rate for COVID. As you can see, all three metrics are at their all-time lows since the start of the pandemic. However, current hospitalization and positivity rate are clearly turning upwards, while daily deaths remain on a downtrend. If the COVID related hospitalizations continue to rise, we could see the daily deaths start to turn upwards soon. POINT 2: VACCINE: VACCINATION DATA COULD "TRUE UP" THIS WEEK AFTER THE DATA DISTORTION DUE TO INDEPENDENCE DAY _____________________________ CURRENT TRENDS -- VACCINATIONS: - avg 0.5 million this past week vs 0.9 million last week - overall, 47.7% fully vaccinated, 55.1% 1-dose+ received _____________________________ VACCINATION FRONTIER UPDATE --> ALL STATES NOW NEAR OR ABOVE 80% COMBINED PENETRATION (VACCINES + INFECTIONS) Below we sorted the states by the combined penetration (vaccinations + infections). The assumption is that a state with higher combined penetration is likely to be closer to herd immunity, and therefore, less likely to see a parabolic surge in daily cases and deaths. Please note that this "combined penetration" metric can be over 100%, as infected people could also be vaccinated (actually recommended by CDC). - Currently, all states are near or above 80% combined penetration - RI, MA, SD, CT, NJ, IL, NY, DE, NM, UT, PA, ND, AZ, MN, CA, FL are now above 100% combined penetration (vaccines + infections). Again, this metric can be over 100%, as infected people could also be vaccinated. But 100% combined penetration does not mean that the entire population within each state is either infected or vaccinated. Below is a diffusion chart that shows the % of US states (based on state population) that have reached the combined penetration >60%/70%/80%/90%. As you can see, all states have reached 60% and 70% combined vaccination + infection. 95.5% of US states (based on state population) have seen combined infection & vaccination >80% and 65.6% of US states have seen combined infection & vaccination >90%. There were a total of 444,433 doses administered reported on Sunday. Over the past 7 days, 511,977 doses were administered per day on average, down 45% from 7D ago. The daily number of vaccines administered is likely to catch up after the under-reporting last week due to Independence Day. However, the overall vaccination trend has been sliding down over the past 3 months. As the more transmissible Delta variant gradually becomes the dominant strain in the US, vaccinations could not only provide some degree of protection against the virus but are also likely to reduce virus transmission. Therefore, we might see the vaccination trend start to turn upwards. However, we understand that the vaccine hesitancy might not that easy to be eased. More studies on the vaccine's side-effect and efficiency against the variant as well as government efforts are the key. We will be closely watching the relevant data. _97.7% of the US has seen 1-dose penetration >40%... _ To better illustrate the actual footprint of the US vaccination effort, we have a time series showing the percent of the US with at least 45%/45%/50% of its residents fully vaccinated, displayed as the orange line on the chart. Currently, 83.0% of US states have seen 40% of their residents fully vaccinated. However, when looking at the percentage of the US with at least 45% of its residents fully vaccinated, this figure is 63.1%. And only 44.5% of US (by state population) have seen 50% of its residents fully vaccinated. - While 97.7% of US states have seen vaccine penetration >40%, 89.1% of them have seen 1 dose penetration >45% and 64.3% of them have seen 1 dose penetration > 50%. - 83.0% of the US has at least 40% of its residents fully vaccinated, However, only 63.1% of US has fully vaccinated >45% and 44.5% of US has fully vaccinated >50%. This is the state by state data below, showing information for individuals with one dose and two doses. The ratio of vaccinations/ daily confirmed cases has been falling recently (red line is 7D moving avg). Both the surge in daily cases and decrease in daily vaccines administered contributed to this. - the 7D moving average is about ~30 for the past few days - this means 30 vaccines dosed for every 1 confirmed case In total, 333 million vaccine doses have been administered across the country. Specifically, 183 million Americans (55% of US population) have received at least 1 dose of the vaccine. And 158 million Americans (48% of US population) are fully vaccinated. POINT 3: Tracking restrictions lifting and subsequent effects in individual states Point #3 focuses primarily on tracking the lifting of restrictions, as states have eased the majority of mandates. Keep in mind, easing/lifting restrictions are contingent upon state of emergency ordinances being renewed. - States in groups 1 and 2 represent states that let their emergency ordinances expire, or that never had one in the first place - Note: IL and HI are not listed. This is because restrictions lifting is determined at the county / island level, and no statewide policy will be established to lift restrictions until a full reopening So there is a spectrum of approaches. Our team is listing 3 tiers of states and these are shown below. - states that eased all restrictions in 2020: AK, OK, MO, FL, TN - states that have eased all restrictions in 2021 to now: ND, SD, NE, ID, IA, MT, MS, AZ, SC, WY, TX, GA, AR, KS, WI, IN, AL, UT, NH, LA, NJ, KY, MN, MA, VT, OH, WV, ME, MI, NY, OR, PA, MD, DE - states that are still easing restrictions in 2021: WA, NC, CA, NM, CO, NV, CT, VA, RI, DC GROUP 1: STATES THAT LIFTED RESTRICTIONS IN 2020... The daily case trends in these states are impressive and it is difficult to say that lifting restrictions has actually caused a new wave of cases because the case trends in these states look like other states. GROUP 2: STATES THAT HAVE LIFTED RESTRICTIONS IN 2021 TO NOW... Similar to the list of states above, the daily case trends in these states are impressive and it seems that lifting restrictions hasn’t caused an increase in cases. GROUP 3: STATES THAT ARE STILL EASING RESTRICTIONS IN 2021... These states have begun to lift restrictions, but have yet to ease all restrictions. The date of each state’s most recent restrictions lifting is indicated on each chart. The case trends in these states have been mostly positive. - Easing restrictions appears to have contributed to an increase in cases in several of these states, most drastically in OR, ME, WA, and MN

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