COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are "consolidating" and we do not view this as a top.

COVID-19 confirmed cases surged again on Wednesday, rising +5,083 to a new high of 38,296.  I think it is important to appreciate this surge is not really a second wave, but really a surge in cases from states which have seen a surge in cases since early June.  One way to see is the chart below, creating 3 composites for the US daily cases:

– NY/NJ/CT which was the original epicenter
– F-CAT (Florida, CA, AZ and TX) which as we wrote about, did see imported cases which are now community transmission
– Rest of 43 states.

Looked at this way, the NY tristate has crushed downwards case growth.  But F-CAT is seeing a parabolic rise.  And as we have commented in the past few weeks, we believe the “accelerant” is the ongoing nationwide protests, more so than the re-opening of the states.

COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.


Source: COVID-19 Tracking Project

But this is not the only explanation.  I think the South is getting hit with a quadfecta:
 
– “indoor season” as it gets so hot, people go inside
– Higher Latino/Black/minority share (vitamin D)
– Spillover from Latin America (had to quantify)
– BLM movement is gasoline to spread

And this part of the country was forced to “lockdown” for two months in March-April while experiencing little of the horror seen in NY/NJ/CT.  Thus, this “inexperience” with the trauma of COVID-19 is likely another factor.  Americans may not feel the need to be as diligent about social distance and PPE as a result.  So, in fairness, to an extent, I understand why many Americans might have let their guard down regarding COVID-19.  And also, I am really starting to see the resistance to the use of masks as well.  Now as the number of cases soars, and as mayors and Governors start raising the alarm, and as residents start to personally know of cases/hospitalizations/deaths, we think this may bring on a wave of diligence.  I am saying this, but I am only making an observation.  

Another important point to emphasize is that the surge in cases is not leading to the same surge in hospitalizations and cases (discussion below).  Sure, in many states, hospitalizations are up, but this is a far cry from the ICU/emergency room surge seen in NY tristate.  Take a look at this chart below comparing the relationship between new cases and hospitalizations in two different timeframes — early March-April (initial surge) vs May to now (F-CAT surge).  Notice how the relationship completely diverged?

COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.


Source: COVID-19 Tracking Project


But case surge is not a good thing. There is no “spin” that makes this positive (mitigating this is the hospitalizations are not surging).  And fortunately, we are seeing more and more “course correction”

– Disney announced it is delaying the opening of Disneyland in CA
– Governors of NY/NJ/CT are requiring 14-day quarantine for visitors from Alabama, Arkansas, Arizona, Florida, North Carolina, South Carolina, Utah and Texas.  
– Odd that California is NOT on the list.
– Masks are being urged by many Governors and Mayors (=good, but we realize this is not popular)

Shutting down the economy again hard to justify…
Does the US economy need to shut down?  Here is a way to think of it.  

When NY/NJ/CT saw COVID-19 raging across the state, there was little reason to shutdown TX, CA, AZ, FL.
So, if F-CAT is seeing a surge in cases, and now their respective citizens hopefully respond with better diligence, why shut down?

STRATEGY: NASDAQ New Highs + VIX not “surgy” = Healthy pullback, Not top
There is nothing normal about 2020.  As we have noted multiple times:

– not a normal disease
– not a normal biz cycle
– not a normal fiscal policy response
– not a normal Fed response

Going back to March, if someone told us that we would see a resurgence in cases by late June, I would have seen that as a negative catalyst.  But in the past 3 months, the cumulative knowledge of COVID-19 and its consequences has changed.  This new rise in cases can be mitigated by “course correction” and was likely fueled by BLM protests, more than re-opening the economy. 

The equity market is overbought and needs to consolidate.  So, the sell-off yesterday, in our view, falls into the category of healthy profit taking. It is interesting to see how the carnage yesterday was extolled as proof this is a “suckers rally” and based on lack of fundamentals.  There are numerous “Vs” in a lot of incoming data lately.

And in the meantime, NASDAQ made an all-time high this week.  And given the >$4.7T of cash on the sidelines, plus the obvious cautious sentiment, and we think this correction will be short-lived. 

The one thing I cannot really say with certainty, is when this parabolic rise in F-CAT COVID cases will peak.  But every individual has “self-preservation” instincts.  I know that when NY/NJ/CT saw the scourge, everybody I know took action.  So I think this is the dynamic that we should start to see in F-CAT and other states with surges.



POINT #1: USA cases new high, not a 2nd wave, but an F-CAT wave (FL, CA, AZ, TX)…
Total USA COVID-19 cases rose to a new high on Wednesday to +38,296, up +5,086 from 1D ago.  As we mentioned above, this is not a second wave, but a new wave of cases seen in multiple states, but largely concentrated in “warmer” states:

– F-CAT (Florida, California, Arizona, Texas) which look like imported cases from Mexico/Latin America;
– Arkansas and Utah and now spreading to NC, SC, AL, TN — most of these states are now in “indoor air conditioning season”


COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.


Source: COVID-19 Tracking Project



Each state had different re-opening timelines, yet a synchronized rise — common threads –> protests + imported cases 
This is not a positive development and states/policy makers need to do some serious course correcting.  But the more important curiosity is the synchronized rise in cases across multiple states.  As many of you know, states followed different timelines for easing, but there is curious mass synchronization of case surges.  The common threads?

– >350 nationwide protests >3 weeks 
– surge of imported cases from Latin America/ Mexico in this timeframe


Moreover, while overall cases are rising, it is not a second wave…
While some might deem the overall rise in US cases as a “second wave,” this is not really the case.  So, I am repeating a chart from above, the surge in cases is largely F-CAT.  And as the chart below shows, these states are still in their first wave.

– in fact, the initial epicenters, NY/NJ/CT have seen cases largely diminish since their peak in late March.

COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.


Source: COVID-19 Tracking Project


6 states with the largest 1D increases
Florida               5,511 vs 3,286 (1D) +2,225
California          7,149 vs 5,019         +2,130
North Carolina  1,721 vs    848            +873
South Carolina 1,284 vs    912            +372
Washington         516 vs    190           +326
Alabama              967 vs    643          +324
Total 6 states                                   +6,250


6 states with largest 1D declines
Arizona              1,795 vs 3,593 (1D) -1,798
Louisiana              882 vs 1,356           -474
New Jersey           158 vs    319          -161
Missouri                291 vs    434          -143
Connecticut            14 vs    117          -103
Nevada                 365 vs   462           -97
Total 6 states                                    -2,776

COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.


Source: COVID-19 Tracking Project


Gross hospitalizations were flat compared to Tuesday, a good thing (33 states report gross).  And for those 18 states that report “net admissions” this figure has been flat vs 1D ago.

COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.


Source: COVID-19 Tracking Project 


Daily deaths are also stable and this is important to watch.

COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.


Source: COVID-19 Tracking Project 



POINT #2: Compare past 4-weeks vs March: Cases vs Hospitalizations vs Deaths
Changing linkage between cases and hospitalizations…
We have created a few scatter charts to really emphasize how cases and hospitalizations have diverged in the past month.

– From March 4 to April 24, there was a clear proportionate relationship between cases and hospitalizations
– Since May 27 (when cases began surging) this relationship has diverged

COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.


Source: COVID-19 Tracking Project  


Not clear why this is happening, but a few factors…
There may be a few factors explaining this and we are not sure the contribution of each of these factors, but they are factors nonetheless:

– new cases are “younger” infected, so the severity risks are lower
– fewer cases at nursing homes, which accounted for >45% of death in March-April
– viral loads could be lower and thus milder cases
– could the virus be weakening?

In any case, if hospitalizations trends track cases with a lower “co-efficient” (meaning, for each new case, there are fewer hospitalizations), then this is a positive development.  COVID-19 remains a mysterious disease, so we would not want to make that conjecture that this will continue.


Deaths are also diverging from cases…
This same curious divergence is happening with cases compared to deaths.  As you can see below, this relationship has changed since April.  Many commentators have said deaths lag hospitalizations which lag cases.  And logically, this makes sense.  But:

– in that two month period early March to late April, death and cases moved proportionately.
– Italians doctors noted how many severely afflicted patients died within 2-3 days
– but since late May, deaths and cases are not moving together.

COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.


Source: COVID-19 Tracking Project  


Ultimately, the trends in hospitalizations and deaths are the key.  Think about it. If cases rose, but hospitalization utilization was flat.  Then, we would have a different crisis.  At the state level, there is a rise in hospitalizations seen, so not every state is seeing this divergence.

– On a weekly basis, COVID-19 ranks as the #5 cause of death in the USA.

COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.


Source: Fundstrat, CDC, COVID-19 Tracking Project   





POINT #3: Comparing F-CAT (TX, CA and FL, no AZ though) to NY/NYC
California: 79% of new cases in the past 2 weeks is Southern CA…

The surge in cases in CA is almost entirely a Southern CA story as illustrated by the heatmap below.

COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.



Source: Fundstrat, California Department of Public Health


Our data scientist, tireless Ken, quantified this below.  

– Southern CA is 79% of new cases in past 14D compared to 60% of the population
– Bay area is 8.5% of new cases and 19% of the population
– Rest of state is 12.6% of new cases and 19.6% of population

In other words, the surge in CA is primarily in the border area with Mexico.

COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.


Source: Fundstrat, California Department of Public Health

COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.


Source: Fundstrat, California Department of Public Health


California prevalence in large cities is much lower than NYC, except for Imperial county…
When looking at cases per 1mm residents (to adjust for populations), CA counties have much lower prevalence compared to NYC.  Los Angeles is less than half of the case prevalence of NYC area.

– the exception is Imperial County (border with Mexico) where case prevalence is >30,000 per 1mm resident, or 50% greater than NYC.

COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.



Source: Johns Hopkins 


Florida: Surge in cases is higher in the Miami-Dade area (which includes Ft Lauderdale and Palm Beach)…
Florida’s case prevalence is also highest in the Southern part of the state (Miami, Ft Lauderdale, Palm Beach) but it is also rising in Orlando as well.  The base of cases in Orlando is simply much lower (Orange county).

– Miami has the highest case prevalence and it is half of NYC.

COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.


Source: Johns Hopkins 


Texas: Case prevalence is 1/4 of NYC…
Case prevalence in TX is also low.  This speaks to the possibility for case growth to be much worse in the coming weeks and months, as COVID-19 has simply not spread that widely. And as we noted above, because this is “indoor A/C” season, we could see case spread aided by this.

COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.


Source: Johns Hopkins 


But Houston remains the hotspot, with the hotspot in Texas.  The surge in the city aligns with the nationwide protests, particularly as George Floyd was raised in the Third Ward of Houston.


COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.


Source: Johns Hopkins  

And even the OpenTable surge in reservations in Houston align with the preparations ahead of the funeral for Mr. Floyd in the past week.

COVID-19 UPDATE: USA cases see new high, not 2nd wave, but an F-CAT wave (FL, CA, AZ, TX). Stocks are consolidating and we do not view this as a top.


Source: OpenTable

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