COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.

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.

It was a quiet weekend, and with better weather, more Americans are venturing out…
It has been just over 100 days (101, first case 1/22/20200 since COVID-19 first reached the US.  As of yesterday, US cases totaled 1.2 million and reported deaths >60,000.  Based on the 6 serology studies conducted in the US (>1,000 patients each), the real figure could be closer to 15X-85X higher, or as many as 18 million to 96 million Americans.  Looking back at the past 100 days, the US has seen a greater prevalence of COVID-19 (compared to Europe) with 3,500 cases per 1mm residents vs 3,500 Italy, 2,749 for the UK, 2,600 France, and 1,980 for Germany.  But COVID-19 related deaths are actually much lower in the USA at 188 per 1mm vs 478 for Italy, 419 for the UK, 381 for France, 82 for Germany. 

The US figure is distorted by the NY state.  Below is the USA data (per Johns Hopkins).  Excluding NY state, the US cases per 1mm is much lower and the US deaths per 1mm is closer to Germany.

USA COVID-19 Cases…
                                           Cases              Pops       Cases/ 1mm
USA                               1,153,420       328,239,523        3,514
– NY                                 316,415         19,453,561      16,265
– US ex-NY (49 states)     837,005       308,785,962        2,711


USA COVID-19 deaths…

                                           Deaths              Pops       Deaths/ 1mm
USA                                    61,785      328,239,523          188
– NY                                    19,189        19,453,561          986
– US ex-NY (49 states)        42,596      308,785,962          138

Source: Johns Hopkins


The weather has improved in the Northeast and with the better weather, more Americans are venturing outside and of course, more protests are taking place regarding ending quarantine.  Even Apple mobility data shows queries for “driving” and “walking” are rising towards pre-lockdown levels.

COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.


Source: Apple
Policymakers are torn between the obvious trade-off between containing a healthcare crisis and the mounting economic carnage.  The good news, no state seems to be reporting any rise in COVID-19 growth, and even California, which had that very big spike of new cases on 4/30/2020 at 2,417 has since fallen back to the prior levels of sub-1,500 per day (same range since mid-April).  Europe has begun loosening restrictions and cases continue to fall, even Germany has seen cases fall even as the economy is opening. 

J.Crew is expected to be the first major consumer casualty of COVID-19.  A crisis makes weaker companies weaker and stronger companies better positioned (on the recovery). 

We were actually surprised to hear Warren Buffet had completely liquidated his airline holdings. Mr. Buffett is a long-term investor, so his decision to sell reflects his belief that the airline industry is facing future challenges that fundamentally change the value-capture of that business.  The reason this surprises us is that the decision implicitly is based on the idea that the threat of COVID-19 is never eradicated.  That is, that COVID-19 is never cured and a vaccine never found–if a vaccine is found or COVID-19 is cured (via mutation or treatment), the need for social distance largely diminishes, until the next pandemic.  If he sold his holdings in early March, during the market meltdown, we can see the logic at that time — sell the weakest positions, and add to the strongest.  

But in the intervening 8 weeks, the outlook for COVID-19 is considerably different (recall the horrific forecasts for global deaths in early March) today.  Curiously, it does seem like a lot of investors have a similar future framework.  They believe we will always maintain ‘6 feet of physical distance’.  I think this is certainly true now and if no medical advances take place (and COVID-19 is a threat forever). 

But if it is cured/vaccinated away.  Will we need mandating ‘6 feet’ 2-3 years from now?

POINT #1: NY state reports COVID-19 current hospitalizations below 10,000 for the first time in this crisis and USA cases steady.
NYC sub-2,000 daily new cases for past 7 days…
The epicenter of the crisis, NYC/NY state remains stable over the weekend with NYC reporting daily new cases below 2,000 for the past 7 days (see below) which is 50% below the 4,000 range reported in the preceding 30 days.  And the 1,961 reported on the most recent day is 74% off the daily peak of 7,520 reported on 4/9/2020.  NYC deaths have also been sub-200 per day, another sign of progress.  

COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.


Source: NYC dept of health

COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.


Source: NYC dept of health

New York City does not seem to be posting further reductions in cases.  And NYC is likely suffering from shelter fatigue.  Check out the photo of West Village photo shared by ‘Achmat X’ today on twitter.

COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.


https://twitter.com/AchmatX/status/1256691575146590208?s=20

NY state cases remain sub 4,000 and new hospitalizations trending lower…
NY state reported 3,438 cases today and that is another sub-4,000 day and still 68% off the peak. Gov. Cuomo also noted total COVID-19 patients in hospitals is now below 10,000 which is a milestone.  He also noted that the gov’t is ‘more needed’ by the people today than any time in modern times.  

COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.


source: COVID1-9 tracking project

And as shown below, cases and hospitalizations are both drifting lower in NY state.  This remains a good trend.

COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.


source: NY state dept of Health





POINT #2: USA daily cases are 25,598 but 3 states did not report case information — CT,  NH and ID. 
Total daily new cases in the US fell to 25,598 and it seems like the reporting of cases in the US is falling into the rhythm of ups and downs.  The data over the weekend tends to be inconsistent and as we highlight below, three states did not report data for today.  So we would not put too much stock in these figures.

COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.


But for those 47 states reporting, none of the top 30 states reported any meaningful rise in cases. Chicago, IL (Cook county) is the only major city with case growth >10% per day so Chicago is not in the ‘downtrend’ phase yet. 

But it is encouraging to see widespread slowing over the past few days.

COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.






California daily cases drift lower after an anomolous surge on 4/30/2020…
California reported 1,419 daily new cases and this is within the range seen in the past 2 weeks.  This is a good thing as there was an alarming spike on 4/30/2020 at 2,417 cases.  And as we wrote at the time, CA Gov Gavin Newsome did not cite any particular reason for the surge, but the county data showed it was solely due to LA county.  Since then, cases have fallen into the range seen over the past few weeks.  

COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.


California is also seeing more protests, wanting the state to end the lockdown.  Below is one of the many protests taking place in CA. This is not only CA, it is happening across the US.  Few places outside NYC-metro/NY state have seen a severe COVID-19 breakout, so the fatigue by those under lockdown is understandable.  

COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.


https://timesofsandiego.com/politics/2020/05/01/thousands-many-without-masks-protest-lockdown-in-huntington-beach/




POINT #3: Germany is set to open more of its economy this week.  Google mobility shows workers going back to office.  Cases down 90% from peak… $15T of Europe GDP taking steps to re-open…

Germany started to allow certain stores to open on 4/20/2020 (smaller retailers and several arger retailers) and has scheduled to further ease restrictions this week.  There is not a whole of information for progress but Apple Mobility (queries for directions) and Google community mobility both show signs of more movement of residents.

– Apple mobility shows that both driving and walking directions have recovered meaningfully, although not to the extent of NYC (which NYC is still under strict lockdown).

COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.


Source: Apple


And Google Mobility shows Germany workers are going back to the office.  The chart shows that the movement of workers back to their workplace as it the best level compared to the baseline of 3/15/2020.  So there is physical movement and change taking place in Germany.

COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.



And Germany’s daily cases are trending down.  As shown below, Germany daily case counts registered a new low now of 697 cases, which is the best since 3/11/2020 and is down 90% from the 6,933 on 3/27/2020.  



COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.


source: https://www.worldometers.info/coronavirus/



14 of European nations is opening up… $15T of GDP
14 countries have announced opening plans.  Of which, Germany is the largest and most important ($4T GDP, 18% of Europe’s GDP).  But the major European nations are largely taken steps to re-open– additionally France ($2.7T GDP, 13% of Europe), Italy ($2T GDP, 10% of Europe), Spain ($1.4T, 6.5% of Europe) and Netherlands ($0.9T, 4.2% of Europe).

In total, this is $15 Trillion of GDP and basically is 66% of Europe’s GDP.


COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.



COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.


source: https://www.worldometers.info/coronavirus/

COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.



source: https://www.worldometers.info/coronavirus/



STRATEGY:  S&P 500 see strong forward returns when ISM <43.  ISM Manufacturing at 41 is lowest since October 2008 and New Orders is essentially lowest ever outside 1980
The ISM Manufacturing report for April was related last week and it came in at 41.5 (a reading below 50 is considered activity is contracting).  The decline below 50 is not surprising and is similar to where the PMI was in October 2008.  It took another 2 months for PMIs to bottom in 2008 at 34.  New Orders fell to 27 which essentially matches the Dec 2008 low of 26 and has only been lower in 1980.  The plunge in the PMIs is expected and is painting a clear picture the US manufacturing sector is facing steep contraction of demand in the face of this COVID-19 shutdown.

COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.


Source: Bloomberg


S&P 500 generally sees strong gains when PMIs fall below 43…  6M/12M median gain is 9%/19% with 76%/87% win-ratio…Markets bottom on bad news.  And markets bottom before fundamentals.  This is pretty evident when looking at the performance of the S&P 500 at different readings of the PMI (ISM Manufacturing).  The chart below is a “distribution” chart showing various PMI readings and the resulting forward return for S&P 500.

– The forward return for equities are stronger at lower levels of ISM (see 12M on the right).
– The best 12M gains for S&P 500 seen when PMIs <43 (ala the April 2020)

COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.


Source: ISM and Fundstrat.  Since 1950.

And as these charts show, we are nearing levels that have only been lower a handful of times in the past 70 years. The new orders, in particular, has only been lower in 2008 and during June 1980.  That was in the middle of stagflation (high inflation and high unemployment).  It is possible that we could see a reading even lower in the coming months.


COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.



Crash in New Orders below 27 have been near lows in S&P 500…
The plunge in New Orders below 27 has only happened 2 times since 1950 and we highlight the S&P 500 and ISM New Orders below in both periods.

The first time was June 1980 and that collapse was followed by a surge back to 60 by Sep 1980.  The June 1980 recession was the first of the double-dip recession (second one started in 1981) and was a brief 6 month recession under President Reagan.  The S&P 500 had actually bottomed in March 1980 and was already rallying and ultimately gain >45% by YE 1980.


COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.


Source: Bloomberg


The second time New Orders collapsed this quickly was December 2008.  This was during the GFC and the economy was still contracting sharply.  The S&P 500 did not bottom until March 2009 (markets seem to bottom in March).  But as we have written previously, the October 2008 low for the equity markets was the structural low.  And many stocks began to rise on an absolute basis after October 2008.

COVID-19 UPDATE: NY hospitalizations <10,000 (another key milestone) and mobility data show Americans slowly resuming activity.



Source: Bloomberg




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