Click HERE to access the FSInsight COVID-19 Daily Chartbook.
This week has been an exceptionally positive week in COVID-19 daily case data. For each of the 4 weekdays, M-Thu, daily cases have been down vs 7D ago (seasonality is big) and given some expected backlog for the long weekend, we did not see any “payback.” Daily cases came in at 36,981 which is down -7,381 vs 7D ago.
– at this pace, daily cases will likely fall below 20,000 next week –> yup
– moreover, this trend suggests daily cases in a serious retreat
– we discuss below how daily cases are falling sustainably in 73% of the US and only 27% of the US is seeing stubborn case trends (see below).
The obvious question is whether anyone really believes this? We see media headlines continuing to point to rising case figures (which will happen in 5 of 7 weekdays, due to seasonality) and that COVID-19 remains unchecked. But the underlying is pointing to a rapid retreat in cases. This despite back to school and other headwinds.
STRATEGY: Updating optimal “epicenter” stock picks –> 45 names
Baby Boomer retail investors, measured by AAII Sentiment Survey, have been bearish since March…
As many of our clients are aware, we view the AAII survey, or American Association of Individual Investors, as one of the standard bearers of retail sentiment. The survey has been conducted since at least 1987 and today represents a very good snapshot of retail investor sentiment. The members are now much older, typically representing Baby Boomers, but as we all know, Baby Boomers also happen to control 76% of the $100 trillion of US household net worth.
– thus, Baby Boomer retail sentiment is arguably the best measure of true retail sentiment, as measured by wallet
– AAII survey shows Baby Boomers have been persistently bearish since the start of the Feb/March crash
– But they never turned bullish
This is one of the reasons we believe markets are not that bullishly positioned. Notice how this survey showed net bullishness in Jan and Feb and this has since evaporated.
– Baby Boomers are more vulnerable to the risks of COVID-19
– they are less concerned about employment prospects, since they are more likely to be retired
Thus, while equity markets have risen to new highs, the typical retail investor remains cautious. Take a look at how stubbornly high money market has remained despite the move in equities to record highs.
– Total money market is $4.6 trillion, which is above the $3.6 trillion at the start of 2020.
– Do you wonder why pullbacks remain shallow?
We have asked our global macro strategy team to identify attractive stocks that are positively levered to the economy re-opening. This is in addition to their Growth recommendations — both Brian Rauscher, Global Portfolio Strategist, and Rob Sluymer, Head of Technicals, still like Growth stocks.
But below are the trifecta. Ranked OW by 2 of 3 teams, Strategy, Technicals and Quant.
Below are the 45 names.
(*) Please note that the stocks rated OW on this list meet the requirements of our investment theme as of the publication date. We do not monitor this list day by day. A stock taken off this list means it no longer meets our investment criteria, but not necessarily that it is neutral rated or should be sold. Please consult your financial advisor to discuss your risk tolerance and other factors that characterize your unique investment profile.
POINT 1: Trend in daily cases remains surprisingly good at 36,891, as no post-Labor day surge seen…
Daily cases continue to show a dramatic organic improvement. Daily cases came in at 36,981, which is down -7,381 vs 7D ago. We have been looking for a day of “payback” where the long holiday weekend would have resulted in a backlog of cases. Instead, we are seeing cases fall.
– key –> this is a downside break in case trends
– cases are organically retreating across the US, despite back to school
Source: COVID-19 Tracking Project
Again, the daily change vs 7D ago, in our view, is the leading indicator as it is what influences the 7D moving average. After seeing daily cases essentially flat for nearly 10 days, the last 5 days were good gains and today’s drop of -7,381 is encouraging given the chances for payback.
Source: COVID-19 Tracking and Fundstrat
Source: COVID-19 Tracking and Fundstrat
POINT 2: COVID-19 is in retreat across 34 states, or 73% of the US
We have written a few times about how the daily cases in the NY tristate (March wave) and FL, CA, AZ, TX, or F-CAT (June-July wave) are in retreat. But there are also 22 states along with F-CAT that have been seeing a sustained decline in cases.
– these 22 states are shown below on the lower section
– they are Vermont, Pennsylvania, Michigan, Colorado, Delaware, Wyoming, Nebraska, New Hampshire, Maryland, Maine, South Carolina, Washington, Idaho, North Carolina, Nevada, Louisiana, Arkansas, Alabama, Georgia, Tennessee, New Mexico, Mississippi
Source: COVID-19 Tracking Project
But as you can see from the table above, this third group of states has cases down >70% from its peak and has been more than 45 days since such a peak. We view this combination as conclusive of states with a peak.
– Moreover, most of these states have a case prevalence >12,500 per 1mm and as we stated in past reports, is a sign of a region with “breakpoint” in infection rates.
What states are still vulnerable? Still 21 states, but only 27% of population…
But there are 21 states where daily cases are still high, or rather more specifically, not that far away from a peak. These 21 states are shown below and the criteria used to identify them is quite simple:
– the state is fewer than 60 days since the peak in cases
– total cases per 1mm residents <20,000 decisively (lower than required for infection break point)
These are the 21 states falling into this category below.
And if we made a composite of these states, it is the red line in the chart below. As you can see, these are the states where daily cases have remained stubbornly high, inching higher in recent weeks while F-CAT and other have seen declines.
– thus, the trend in these 21 states is the one to watch.
POINT 3: NYC largely “back to normal” by October –> Big deal
Let’s be honest with ourselves. One can assert that for many people, there has been a large perception gap between the risk of COVID-19 and its actual risk. Witness those Americans wearing full protection gear with bodysuits and masks, or those who think anyone with a sniffle is infected.
– As this article in the UK Spectator points out, a recent poll shows that Americans believe that 9% of citizens perished in the pandemic.
Americans will have a very different view of the risk of this pandemic in 30 days — witness what is happening inNYC
There are a few things happening in the NYC metro area, that within 30 days, will vastly change perception. In fact, 3 things really stand out:
– NYC is opening for indoor dining on 9/30
– NYC is seeing vast numbers of workers return to the offices, led by JPMorgan
– Inbound international travel is no longer subject to COVID-19 screening
Think about this. In 30 days, NYC residents will be dining indoors. Many will be back at their offices. And inbound international travelers will be coming to NYC.
– Doesn’t this sound like a massive change compared to what we have seen since March 2020?
If you do not believe this is possible. Please read the headlines below.
Granted, this might be long overdue. NYC, as we pointed out yesterday, has seen COVID-19 under control for more than 12 weeks, with daily cases and hospitalizations pinned at extremely low levels. But yet, NYC has been largely shut.
– But as the NY Times article below shows, business leaders are now pushing to change the status.
– Has the mayor of NYC handled this crisis properly?