COVID-19 UPDATE: Meaningful Case + Hospital rises seen in the 3 border states CA, TX and AZ and also 2 other states AK + UT (new). Be wary of negative anchoring biases.

The equity markets have stalled this week, with stocks down the past two days and down slightly week to date.  The equity market has been rising, seemingly relentlessly, so a pause is pretty welcome.  But equities are still largely in the hands of buyers.  There is just simply too much cash on the sidelines.  We wanted to breakout the money market cash between institutional (left) and retail (right).  And both have stayed stubbornly high and at record levels.  So, despite the stories of retail going “all-in”, this is not the case.  It is probably true that Millennial investors, via Robinhood, are trading.  But the bulk of the wealth of retail (Baby Boomers) is sidelined.

Source: ICI and Fundstrat

And part of this cash anchored on the sidelines is due to understandable anchoring biases.  We list a few below.  The observation, in our view, is that the crash was so fast and the bounce so fierce, those who sidelined themselves just find this too “algo-nuts” and then coupling this with the risks being higher to older Americans, who happen to control 76% of the wealth, and you can see this anchoring bias.  This is very similar to 2009-2010, where homeowners (61% of USA) were structurally bearish for too long.

Source: Fundstrat


Countdown to COVID-19 superspread as we close on day 14 of protests…
On the COVID-19 side, the disease continues to spread in the US, with ~20,000 cases per day, but the narrative that matters more is whether we are seeing a second wave — and this second wave will be primarily stemming from the >350 nationwide protests that have been taking place for nearly 2 weeks.  

These protests represented 10,000X super-spreader events, akin to the Champions-League soccer match (sorry, I know it is called football in Europe) that took place in Northern Italy and those 40,000 fans caused the massive spreads in Italy and Spain.  This is our greatest concern and why the whole timeline for COVID-19 has been largely fractured because of this.  And June 11th (Thursday) is really the ‘judgment day’ because it would be a full 14 days since the initial outbreak.

We are going to spend this commentary talking about trends in the states.  We realize the media is highlighting many more states which are reporting higher cases and the NY Times reported that 21 states are seeing a rise in cases.  To an extent, this is ‘technically’ correct, that some states 3D or 7D averages are higher, but take a look at the individual state charts and the averages are impacted by ‘true-ups’ and/or daily noise.

Of >21 states with rising cases, only Arkansas and Utah seem sustained rise in cases + hospitalizations…
Given the massive superspreader events + Memorial Day weekend (16 days ago), we should be really looking for new outbreaks along with a visible rise in hospitalizations.  In our view, we think only 2 states meet this criterion — Arkansas (which we wrote about earlier this week) and Utah possibly (more on cusp).  These 2 states are seeing a rise in cases along with similar rises in hospitalizations.  Utah has been one of the states open the longest, 87 days by our count, and Alabama has been open for 41 days.  But neither is showing any parabolic rise in cases, but rather, a linear increase.  So, the transmission spread is quite a bit more sedate. 

Cases rising in CA, TX and AZ due to imported cases from the border…
But there are also the 3 states seeing “imported” cases taking place on the border states of US-Mexico leading to cases surges in Texas, California and Arizona.  This has been the case for a few weeks now and we wrote about this in the past few weeks.  But we have updated commentary on those 3 states as well.


POINT #1:  USA cases rise 19% with border states CA, TX and AZ accounting for biggest increases.
Total USA COVID-19 cases rose 19% to 20,365, +3,159 vs 1D ago.  This surge was entirely powered by 6 states but the 2/3 of the total came from 3 states: CA, TX and AZ.

– perhaps the best thing we can note (and discuss below) is that there is no evidence yet of a nationwide surge stemming from Memorial Day and from the >350 ongoing nationwide protests.

Source: COVID-19 Tracking Project


On a 7D basis, smoothing out the daily seasonality (weekday lags, etc.), total cases are flat versus a week ago.  This is not the improvements seen in the past 6 days previously (which were down week over week), but this is 1D.  And there tends to be some jumpiness to the progress.  Even looking at the chart below, we can see the 6D prior to those 6D was up.

Source: COVID-19 Tracking Project

6 states reporting significant rises in cases:
Arizona            1,556 vs    618 (1D) +938
Texas               2,504 vs 1,637         +867
California         2,702 vs 2,170         +532
North Carolina 1,011 vs    676         +335
Florida             1,371 vs 1,096         +275
New Jersey        550 vs    299         +251
Total 6 states                               +3,198

6 states with declines in daily cases:
Tennessee            294 vs   631 (1D)  -337
Illinois                    625 vs   797         -172
Louisiana               418 vs   562        -144
Nevada                  134 vs   244        -110
Indiana                   304 vs  410        -106
Pennsylvania         410 vs  493          -83
Total 6 states                                    -952

Source: COVID-19 Tracking Project

Total tests rose modestly to 438k from 412k 1D ago.  So, the rise in tests does not really explain the rise in daily cases.  

Source: COVID-19 Tracking Project



POINT #2:  24 States have cases higher than 2 weeks ago, but only 2 have seen hospitalizations increase as well — AK and UT.
The reality is that COVID-19 is a ‘slow burn’ in the US, with no states and few counties actually reporting ZERO cases.  And many states are seeing higher cases, but these states are also dramatically increasing testing, so it is not entirely clear if COVID-19 is organically spreading or stemming from better detection.

Source: NY Times

We have the 50 states charted below, both showing “daily confirmed cases reported” and “daily hospitalizations.”  The hospitalizations data is reported one of two ways, gross admissions (aka ever hospitalized) and net admissions (net of discharge). We used “grey” backgrounds for those states reporting “net”, so comparability is clearer.  Based on our review of the data, we have grouped states reporting rises by:

9 states notably higher daily cases, but hospitalizations flat to down:
– Alaska                44 days open
– Mississippi         44
– Alabama            41 
– Colorado            40
– Florida               37
– South Carolina  37
– Arizona              40
– Texas                 40
– California           33

2 states with notably higher daily cases and higher hospitalizations:
– Arkansas            87 days open
– Utah                   87

The states open the longest have still not seen a surge in daily cases…
We have the composite of the 50 states, broken down into 3 buckets and as you can see, the states open the longest have not seen a meaningful surge in cases.  There is a rise in states open between 5/1 and 5/11, but this composite includes CA, TX and AZ, which are not necessarily seeing ‘organic’ rises in cases, but this stems from imported cases.  

– And surprisingly, look at the collapse in the states opened after 5/11.  

The states which waited for the longest to open have seen the best improvement in cases.  This does speak to the efficacy and wisdom of waiting to open — as it allowed states to better control the COVID-19 outbreak. Curiously, because Memorial Day and the protests are now >14 days behind us, it is interesting that no state is reporting a surge in cases, in any of the buckets, and not in the “post 5/11” states as well.  

The fact that few of the “pre-5/1” states are seeing a surge is actually a good sign.

Source: COVID-19 Tracking Project


50 States daily confirmed cases…
Below are the 50 states daily reported cases and sorted based on the “re-open” date.  This re-open date is indicated by the vertical line as well.  And the color coding is:

– green, open prior to 5/1
– yellow, open between 5/1 and 5/11
– red, open after 5/11

50 States daily hospitalizations…
Below are the 50 states daily hospitalizations and sorted based on the “re-open” date.  This re-open date is indicated by the vertical line as well.  And the color coding is:

– green, open prior to 5/1
– yellow, open between 5/1 and 5/11
– red, open after 5/11

Notice some charts are shaded grey?  These are states which report “net hospitalizations” (net of discharges) while the majority report “gross” or daily admissions.

Source: COVID-19 Tracking Project



POINT #3: Revisiting the border states–> CA, TX and AZ
It has been widely reported that the states bordering US-Mexico are seeing a surge of imported cases.  These are not ‘organic’ transmission caused by mobility or easing of restrictions, but stem from the overflow of COVID-19 from Mexico.  We have written many times about the growing surge of COVID-19 in Latin America.  And we wonder if the known Vitamin-D deficiency among Hispanics is a factor for that spread.  

TX, CA, and AZ daily Cases are rising but hospitalizations are flat… 
But as the daily confirmed cases are up in these states but hospitalizations (lower chart) are not necessarily surging.  So it is similar to the other states, to the extent cases numbers are much higher but hospitalizations are not necessarily overwhelmed.

Source: COVID-19 Tracking Project


Hispanic ethnicity is 70% of incremental cases in CA…
The 3 states also report ethnicity in their case data, and we have plotted the 7D % share of cases attributed to Hispanics.  And as you can see, this figure is 70% in CA, surged to >50% in Arizona and rising in Texas to around 50%.

– The Hispanic population in these states is well below 50%, so in each case, the share attributed to Hispanics is disproportionately high.
– The US overall is 40% and that is extremely high, given Hispanic is 17% of the US population as well.

Source: COVID-19 Tracking Project

Border counties in these states also show disproportionate cases increases…
Our data science team also plotted cases by county and for each state, we can see the surges that are along the counties bordering Mexico.

– See the cluster in CA?

Source: Fundstrat, CDPH


– Similarly, in Texas, it is the border counties plus Houston (Harris county) that are seeing surges.  El Paso is at the top left of the image.

Source: Fundstrat, Texas Department of State Health Services


And it is the southern counties in Arizona that are seeing surges.

Source: Fundstrat, Arizona Department of Health Services