COVID-19 UPDATE. White House believes US past "apex", so how long does it take 30 nations for cases to fall 75%? Weak consumer = OW Consumer Discretionary
COVID-19 remains a global crisis and we realize that many people need to keep up with COVID-19 developments, particularly since we are moving into the more critical stage ("restart economy"), so feel free to share our commentary to anyone who has interest.
Of all the important milestones in the past week, we believe the most significant from an equity market (which also drives the economy) is the S&P 500 closing above 2,793 (~2,800) as it represents a full 50% retracement of the decline and solidifies two things: (i) the bottom is in and (ii) we are in a bull market recovery, as bizarre as it sounds. But you probably noticed that the market has shifted into the hands of "buyers" whereas sellers were in complete control from 2/19/2020 to 3/23/2020.
And if we are to decipher the message of the equity market rally, it is likely telling us that conventional thinking about the path forward in COVID-19 is simply too pessimistic. This makes sense to me, and if I could highlight some points:
- The US reached peak cases likely on 4/10/2020, which is well ahead of White House guidance and Pres. Trump even observed this today;
- As bad as the US economic data has been (retail sales + Empire + IP), I am surprised capacity utilization is still 73% (very high);
- Bad news = OW Consumer Discretionary (the heart of epicenter) (see below)
Is the stock market telling us the economy may re-start sooner? and with a faster ramp? Recall, BofA Merrill survey showed fund managers predominantly see a U- or W-shaped economic recovery.
In this commentary, we look at how quickly other nations moved from "peak cases" to "75% off from the peak (way down the curve) and it turns out it takes about 2 weeks (70% of the 32 nations/regions). That is pretty quick (see below).
If we move this quickly to a collapse in cases, and it means NY-state really, this is a positive outcome.
POINT #1: White House suggested today the US is past peak cases, now shifting focus on regions where "mitigation" needed
Today, at the White House briefing, the administration expressed the belief the US is past the "apex" in the number of new COVID-19 cases. If this is the case, April 10, 2020 marked the peak at 34,617. VP Pence and Dr. Birx also noted that efforts are to delineate the US between regions with COVID-19 outbreaks and areas where less "mitigation" is required. And Pence pointed out 24% of counties (based on people) have zero cases.
Overall, today showed the US is making progress in the right direction. In numbers, the US reported 30,183 net new COVID-19 cases, but this is principally due to an unexplained surge in NY state (+11,571, which is an ALL-TIME HIGH, and contrast with Gov Cuomo statements today).
- US, ex-NY, reported 18,612 net new cases, which continues the general path that 4/10/2020 was the peak in new cases.
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