COVID-19 UPDATE: NYC breakthrough as new cases 1,613, 78% below peak. Could we now be in the "decline phase" of COVID? Consumer confidence shockingly high = Good. OW Discretionary stocks.
Heads up: We are hosting a conference on Friday to discuss Strategy post "re-start" with our entire team. Details forthcoming.
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.
Today marks a milestone for COVID-19.
We may now be officially in the "decline" phase of the Healthcare crisis. That is, we have seen COVID-19 move from exponential --> linear (flattening) --> decline (falling cases). Why we think we are in the decline phase? Two things happened in the past 24 hours (hopefully it is not transitory):
- first, NYC reported a breakthrough in COVID-19 case count at 1,613, the first sub-2K day in more than 30 days and now 78% off peak (recall our 75% benchmark, which we acknowledge is arbitrary).
- second, for the first time, >50% of the US counties (based on population) have cases 50% or more off peak (31% with 75% off peak). This means, half of the US is further in the "decline phase."
The fact we are in the decline on the healthcare side does not really mean this tragedy is over. Hardly. Healthcare workers and hospitals are still dealing with a major medical crisis, all the while dealing with massive cash flow shortfalls due to the drop in profitable elective surgeries and other treatments. And we still have to deal with the two waves of economic suffering, but the healthcare abating means it is appropriate for states to begin re-opening their economies.
But today's milestone is building upon quite a number of positive milestones over the past few weeks:
- No new major metropolitan outbreaks
- the rise in new hospitalizations/ICU peaked
- COVID-19 deaths ~65k (likely peak) are coming in below original forecast and the revised optimistic case of 100k
- Advances and array of treatments is rising and improving
- US jobless claims likely peaked
- US credit markets fully functioning
- 18 states are re-opening their economies
- And with today's data, it looks like NYC/NY state is decisively past the apex
Collectively, this explains why equity markets have shifted into the hands of buyers. There are also few sellers left. And as we discuss in this note, we think today's crash in consumer confidence is positive for Consumer Discretionary stocks. Since 1971, the best time to own Consumer Discretionary is at the bottom of the consumer confidence cycle. At the bottom. Not top.
POINT #1: BREAKTHROUGH IN NYC: 1,613 daily cases finally fall 78% from peak and first sub-2,000 day since mid-March... 17 days post-APEXNew York City looks like it finally is decisively over the apex.
Daily new cases fell to 1,613 which is the first sub-2k day since 3/24/2020 and is also 78% below the peak. We have used the 75% threshold as a measure of decisive improvement in case count, although that figure is arbitrary, but we view as far enough away from the high to matter. This is quite a breakthrough. NYC has seen cases hover around 4,000 for nearly 30 days -- and given the high likely prevalence (based on serological studies), we wondered if NYC would continue to smolder through the summer.
Daily new cases has become less dependable in recent weeks, because of the rapid expansion in testing -- in fact, testing nationwide has roughly doubled in the past 10 days and likely 3X-4X greater in the next 4 weeks. But still, absolute case count falling for NYC is a positive development.
So this drop in cases is a big deal, in our view. We hate to speak too early -- but it looks like one could say "NYC is well into the path of recovery." And the next step is the re-opening of the NYC economy.
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