COVID-19 UPDATE: USA COVID-19 cases could be sub 10,000 by end of August. USA > ROW? Singapore case prevalence exceeds Europe.

Click HERE to access the FSInsight COVID-19 Daily Chartbook.

Total USA COVID-19 cases came in at 49,820, which is up from 1D ago (typical midweek) but is down ~9,000 from 7D ago.  The 7D ago delta is the key and as we mentioned in prior notes, is a proxy for the R0.  If R0 < 1.0 is similar to seeing 7D delta negative.

– the most noticeable trend is the 7D delta decline is accelerating
– 5,000 or so last week
– 10,000 this week

Source: COVID-19 Tracking Project


Daily cases only 2,000 by the end of August?
We made a simple table below. This is forecast, assuming daily cases are 10,000 lower vs 7D ago.

– By the end of August, USA might have 2,000 cases
– 10,000 7D delta assumes no improvement in R0

Source: Fundstrat


By the way, this would track what we saw in the NY tristate area.  As shown below, it took 25 days for cases to fall 75% and 46 to fall 90%.  Cases peaked on July 17th in the US.

Source: Fundstrat


STRATEGY: If we see a crushing decline in cases in the next few weeks, the rotation will be violent

THOUGHT: If US follows the above path for cases, we should see a violent rotation in stocks.  

I have been finding investors closed to the idea of buying Cyclicals, because many have a 1-3 month time horizon and in this period of time, they see few reasons to be confident about the US economic re-opening, or even sufficient progress on a cure. Frankly, that is a reasonable argument.

 

But my guess is that this argument remains true as a long as the trend in US coronavirus is uncertain.  Even as US cases are falling, one could dismiss this for multiple reasons:

– Some states are relapsing
– Teens are causing a new spread/new communities to infect
– Europe is resurging
– Schools in the Fall

These are reasonable arguments and the list goes on and on.  But what if the US path in cases is a crushing decline? Such high prevalence and cases fall, and we see sub-20,000 cases by late August?  I think if that happens, Americans breathe a sigh of relief.  The country can handle surges.

And if this plays out, the rotation into epicenter stocks would be violent.  An abrupt re-positioning.  This could also happen if there is a breakthrough in a vaccine or a cure.


Wynn Resorts (WYNN) reports a 95% drop in revs for June quarter, but stock surges…
Is the bad news baked into the epicenter stocks?  That is a good question, but the casinos are certainly a good barometer.  For the June quarter, WYNN’s total sales declined ~95% to $86 million compared to $1.7 billion a year ago.  This is a staggering decline, but is it surprising?

Casinos faced mass closures globally and there is simply no offset.  There is no such thing as “curbside” gaming or gaming “delivery” or legal online gaming.  

The stock is actually up slightly in the after hours, partly because the earnings from LVS and MGM already signaled what to expect.  I think it is too easy for investors to get negative on travel-related businesses, because the current state is horrifying. As long as the virus is perceived to be spreading wildly, Americans will stay cautious, but this is a snapshot of yesterday. 

Source: Bloomberg




POINT 1: USA daily cases 49,820, +7,551 vs 1D ago but -8,899 vs 7D ago (key)
Daily COVID-19 cases came in at 49,820 which is another sub-50,000 day.  This is up from 1D ago but is typical weekday seasonality.  In fact, the decline in COVID-19 daily cases is accelerating.  That is, we are seeing cases fall faster vs 7D ago.  This is a good development.

Source: COVID-19 Tracking Project


Leading this decline in overall cases is a serious decline in reported cases from the epicenter, FL, CA, AZ and TX, or F-CAT.  As shown below, since reporting a daily peak in cases of >40,000, it is down >50% to sub-20,000.  We discuss this in more detail in the next section.

Source: COVID-19 Tracking Project


There was a rise yesterday in Texas towards 9,000 but Texas cases have been in a plateau.  This is not that different from what we saw in NY in April.  And other states, FL, CA and AZ are seeing continued declines

6 states reported a sizable 1D increase
Texas             9,167 vs 5,303 (1D) +3,864
Tennessee     1,805 vs 1,009            +796
Louisiana       1,874 vs 1,099            +775
Florida           5,446 vs 4,752             +694
Mississippi     1,074 vs    572           +502
Oklahoma         861 vs   377           +484
Total                                             +7,115

6 states reported a sizable 1D decline
California         4,526 vs 5,739 (1D) -1,213
Connecticut          48 vs    252            -204
Virginia           1,145 vs 1,324             -179
Alabama        1,041 vs 1,217             -176
Maryland           710 vs   870             -160
Iowa                 201 vs    349             -148
Total                                               -2,080

Source: COVID-19 Tracking Project


The trend in deaths is equally encouraging (daily deaths vs 7D ago) as we are seeing this flatten.

Source: COVID-19 Tracking Project


But the trends in hospitalizations have been good.  The number of patients in hospitals is actually going down.  So, the surge in cases is not leading to a surge past hospital capacity limits.  This remains one of the better outcomes.

POINT 2: COVID-19 case growth slowed in F-CAT as prevalence matched NYC…
The slowing of COVID-19 cases in the epicenter states, FL, CA, AZ, TX, or F-CAT, is becoming more evident with each passing day.  The exception might be Texas where cases have been stubbornly high, but this is not that different from NY state, which had a long plateau, before cases collapsed.

Within F-CAT, the 4 major cities within each state, or the nucleus, have been the place to watch as a leading indicator.  The 4 major cities are shown below Miami (FL), Los Angeles (CA), Phoenix (AZ), Houston (TX).  

– the trend in these 4 cities is decisive for 3 of the 4 (TX not).
– Miami and Phoenix are seeing a crushing collapse in cases.

Source: Johns Hopkins

We believe this is what we should expect to see throughout the state.  Is this herd immunity or just simply the lagged effect of better mitigation?  We are not sure, but these are very encouraging signs.


Every major East coast city in Florida has higher cases per 1mm residents than NYC…
In terms of cumulative cases per 1mm residents (to improve comparability), notice how every major city in Florida has higher cases per 1mm residents than NYC?

– at 47,000 cases per 1mm residents, Miami has a confirmed case penetration of 4.7%. 
– if serology estimates are correct that 3X-10X above detected rates, this implies 15% to 50% of Miami was infected

At these high levels, we think COVID-19 has a vastly diminished second wave risk.

Source: Johns Hopkins

Even most cities in Texas are closing in on the high case prevalence seen in the NY tristate area.  We added Fairfield, CT (Greenwich, etc.) as a comparison as well. 

– San Antonio and Dallas have nearly matched NYC.  And notice San Antonio cases basically hit a wall at that point.
– Austin and Houston are nearly matching Fairfield.

Source: Johns Hopkins

So we think it is only a matter of time before we see a collapse in cases in the F-CAT states.



POINT 3: Young people causing rise globally… USA/Brazil “safest” places this Fall?
Along with the slowdown in the US, the trend in global COVID-19 cases is falling as well.  After surging to >290,000 daily cases globally, this figure is down about 20% in the past week. But the slowing of global cases is masking emerging hotspots/sources of case growth:

– India/Asia still rising cases 
– Western Europe is seeing a rise in cases in France, Spain and the Netherlands, among many
– Youth/teen parties seem to be fueling surges throughout the US and Europe.

Source: Johns Hopkins


In fact, this WSJ article caught my eye, as this looks like a European version of what is happening in the US in many states (even NJ, as highlighted yesterday).  Can we blame younger adults/teens for wanting to be themselves? The disease is considerably less risky for them.  And their leisure time tends to be more social and involves dense gatherings.

https://www.wsj.com/articles/coronavirus-cases-rise-in-europe-as-youth-hit-beach-and-bars-11596364200


I ended up sending this article to one of my good friends who was heading to Europe with a bunch of his friends (he is based out of London).  I was curious whether or not he was hearing about the rise in cases in Europe.  

His response is below.

Source: messaging app


Daily cases in Spain, France and Singapore now exceed the daily cases in NY state…Daily cases have begun to creep up in Western Europe.  We have plotted the daily cases (per 1mm residents, to make comparable) for:
– Spain
– France
– Singapore

And for comparison purposes, also highlight the current daily cases per 1mm residents for:
– USA
– NY
– CA

Here is what might surprise some.  

– Daily cases in Spain, France and Singapore exceed that of NY
– Spain’s daily cases are nearing that of CA, which is currently one of the USA’s COVID-19 epicenters.

Source: Johns Hopkins

Source: Johns Hopkins


The surge in Singapore might surprise many, because this country has been viewed as largely spared from this outbreak.  And the country conducts extensive contact tracing and has many mitigation measures in place.  Much of this outbreak is from this worker/immigrant population, who live in multi-person dormitories and where superspreader events can take place.  But as shown below, daily cases per 1mm residents is well past what NY state is seeing.

Source: Johns Hopkins


Same question about whether there is a natural “infection break point” that is reached at 12,500 cases per 1mm residents…
In Latin America, Brazil seems to be seeing a dramatic slowing of COVID-19 cases with daily cases (per 1mm) down >60% in the past few days.  There seems to be some lumpiness/seasonality to their data, so this could easily worsen, but as this chart below highlights, the same plateau we saw in the US seems to be taking place in Brazil.

Source: Johns Hopkins 



Brazil case prevalence is just about hitting 12,500 per 1mm residents.  As many of our clients know, we have used this as an informal break point for COVID-19 cases as it seems like many states had begun to see a slowing as cases hit this threshold.


Open countries Israel and Sweden have lower case prevalence than Singapore…
What is also interesting is highlighted below.  The case prevalence in the open nations, Israel and Sweden, have lower case prevalence than Singapore.  Singapore, to my surprise, has exceeded both.  And as we commented above, this even as the nation exercised extensive mitigation measures and contact tracing.

– But given the low prevalence in Western Europe (see France/Spain), we think these nations are at greater risk for a surge compared to the US.

Source: Johns Hopkins