COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs

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


STRATEGY: High-yield sees record issuance volume last week = positive for equities
The positive trends in COVID-19 daily cases continued over the weekend.  We saw Sunday new daily cases fall to 41,984 and this is sharply lower than a week ago.

– This fall in cases happened despite record CA backlog
– plus, Tarrant County, TX reported ~1,800 cases in backlog.
– TX is the only state with >100 daily new cases vs 7D ago

COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs


Source: COVID-19 Tracking Project


Daily cases tend to be lower Monday (see above) and we think daily cases could fall to 37,500 to 39,000 this week.  That is a major milestone and if we see this sub-40,000 level of cases Monday, it will validate that the COVID-19 June-July surge is now in full retreat.


We have written extensively about our view that high-yield bonds are a virtual leading indicator for stocks and the key metrics that we watch are:

– spreads rally = positive P/E expansion
– strong issuance = strong risk appetite = positive for stocks

Despite the concerns about progress around new fiscal stimulus from Washington and the rise of bond yields, demand for high-yield bonds remains very strong.  High-yield bond issuance issued $19.9 billion in bonds, which is the 4th largest on record and follows the week prior with $22.2 billion, the 3rd largest on record.  According to JPMorgan, HY bond issuance in August MTD is the most active August on record.

COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs



HY bonds saw a sixth week of inflows and 6 of the 7 largest ever inflows into high-yield bonds took place within the last 5 months.  So, this positive inflow, along with strong issuance and positive price performance bodes well for stocks.  In other words, if someone is trying to see if stocks could falter here, the fact that HY bonds are performing so strongly, with very solid underlying demand, suggests that P/E in stocks can further expand.

I found this LinkedIn post by Jurrien Timmer of Fidelity really interesting. It looks at the top 25 largest stocks at major market tops:

– June 1972
– June 2000
– June 2020


COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs


Source: LinkedIn


For those worried about the large weights of the megacaps today, they are far lower than what was seen at major tops:

– IBM was nearly 13% of the S&P 500 in June 1972 compared to MSFT at 5%
– GE was 7% in June 2000.

The bottom line, this fits with our view that the high market cap share of the megacaps is not out of line with their earnings contribution.  As shown below, the market value share and earnings share are pretty similar for the current S&P 500.

– perhaps the only outlier is AMZN.

COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs

           



POINT 1: Daily cases fall over the weekend, 41,984 new cases, -5,500 vs 7D ago… should be 37,500-39,000 this week…
Daily cases fell over the weekend.  This fall in cases took place, despite Tarrant County, TX (Fort Worth) reporting nearly 1,800 backlogs in cases that were included.  The trend in cases organically is falling and there is not really a new set of states that is seeing a surge to offset the declines were are seeing in the 4 epicenter states, FL, CA, AZ, TX, or F-CAT.

COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs


Source: COVID-19 Tracking Project and Fundstrat

We view the 7D delta as the leading indicator and as shown below, the 7D delta is solidly negative.  CA continues to report distorted results due to a significant backlog of ~300,000 tests that are now being added as these records are being reconciled.  And ex-CA, we can see cases down >5,000 vs 7D ago.

COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs
COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs



Source: COVID-19 Tracking Project and Fundstrat


These 6 states reported 7D delta increases.  Doesn’t Texas standout?

COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs
COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs



COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs


Source: COVID-19 Tracking Project and Fundstrat




POINT 2: After F-CAT, states seeing rise in cases are just SMALL
Below is a table sorting the 50 states based upon the highest daily cases per 1mm residents (3D avg) and as you can see, 3 states are above Florida:

– Nevada, Georgia and Tennessee
– But the total population share of these 3 states is 6%, compared to 30% for F-CAT
– Thus, if F-CAT is in retreat + NY tristate tame, >60% of USA is seeing plunge in cases

COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs


Source: COVID-19 Tracking Project and Fundstrat 


Moreover, taking a look at the county-level data and the share of USA with cases >50% and 75% off their highs:

– the share of USA with cases >50% off highs is now 72%, nearly the highest since the pandemic started

COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs


Source: COVID-19 Tracking Project and Fundstrat  


We have mapped the USA below and in green mark the states with cases the greatest % off their highs.  Notice how the Southern US and NY tristate are turning solidly green?

– The places with “red” are those states with high numbers of cases relative to their peak. 
– This map shows how places seeing lots of protests, like OR and MN are those states with relatively high cases.

COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs


COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs


Source: COVID-19 Tracking Project and Fundstrat   


Even look at Georgia, daily cases are rolling off their highs.  So, again, it looks like the USA is seeing a retreat from COVID-19.

COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs


Source: COVID-19 Tracking Project and Fundstrat    





POINT 3: New research paper suggests COVID-19 originated in Chinese mineshaft in 2012…
A NY Post article over the weekend referenced a new research paper by virologists, Jonathan Latham, Ph.D. and Allison Wilson, Ph.D., who both work for the Bioscience Resource Project.  The researchers had a Chinese master thesis translated by a Chinese doctor who wrote about the treatment of the miners in 2012.

COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs


https://nypost.com/2020/08/15/covid-19-first-appeared-in-chinese-miners-in-2012-scientists/?utm_campaign=iphone_nyp


Their paper was published on a website called Independent Science News.  They begin their paper by pointing out that the nearest genetic relative to COVID-19 is two viral sequences BtCoV/4991 and RaTG13, both of which were collected from the lungs of miners in 2012.  The 6 miners were cleaning out a mine shaft that was filled with massive layers of bat droppings and fungus growth.  Ultimately, 3 of the 6 miners died.

COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs


https://www.independentsciencenews.org/commentaries/a-proposed-origin-for-sars-cov-2-and-the-covid-19-pandemic/

Their work stems from a translation of a Chinese doctor’s thesis on the deaths of these 6 miners and that thesis was published in 2013.

COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs


https://www.independentsciencenews.org/commentaries/a-proposed-origin-for-sars-cov-2-and-the-covid-19-pandemic/ 


Latham and Wilson note that these two viruses from the mineshaft, BtCoV/4991 and RaTG13 have 98.7% and 96.2% genome similarity to COVID-19 and as this chart below shows, exceeds that of any other know SARS virus.  Thus, they are surprised these viruses were not given greater scrutiny in the earliest days of this disease.


COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs
COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs



https://www.independentsciencenews.org/commentaries/a-proposed-origin-for-sars-cov-2-and-the-covid-19-pandemic/ 


They suggest these miners had symptoms that would be classified as COVID-19 today. 

COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs


COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs


https://www.independentsciencenews.org/commentaries/a-proposed-origin-for-sars-cov-2-and-the-covid-19-pandemic/   

And they believe that some type of co-infection led to the change of the virus to COVID-19.  And this only took months, not decades, within the lungs of the miners.

COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs


https://www.independentsciencenews.org/commentaries/a-proposed-origin-for-sars-cov-2-and-the-covid-19-pandemic/  

COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs


https://www.independentsciencenews.org/commentaries/a-proposed-origin-for-sars-cov-2-and-the-covid-19-pandemic/   


The virus was known to have been cataloged and stored in the Wuhan lab.  Of course, one might wonder how does a virus get out of a but the authors point out that viruses escaping from labs is unfortunately quite common:

– six documented outbreaks of SARS from labs
– two pandemics, H1N1 and Venezuelan Equine Encephalitis both escaped from a lab.

COVID-19 UPDATE: Daily cases fall over the weekend and daily cases could be ~37,500-39,000 Monday, or 50% off highs


https://www.independentsciencenews.org/commentaries/a-proposed-origin-for-sars-cov-2-and-the-covid-19-pandemic/    

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