COVID-19 UPDATE: Positivity rates at colleges might be lower than local state. Investors abruptly bearish = good risk/reward

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

STRATEGY: The Street has suddenly become very bearish = risk/reward favorable
What happened to the “dip buyer”?  In fact, not only has the dip buyer “left the house” but investors have turned outright bearish.  According to @hedgopia, NDX futures positioning is the most net short since August 2006 (134k contract in 3 weeks).  

– It is an almost overnight reversal of market positioning.

Source: twitter

Granted, the short of NDX futures could be a portfolio hedge (so a fund doesn’t have to sell it holdings) but the fact of the matter is, this is a net increase in short positioning.  September has been a terrible month for equities, with volatility rising, leadership influx and the worst month for equities since March 2020. 

– so a change in views is not surprising.
– but to become the most bearish in 14 years?
– wut?

For those who think there is only bad news ahead from Washington, it seems like there is some hope still for a stimulus package in the coming weeks.  Nancy Pelosi made these comments on a CNN interview Sunday (as per CNBC below) and she wants to forge ahead.  The impetus coming from the moderate Democrats.

– this would be a deal before election day which is 40 days away.

Source: CNBC


I asked our Policy Strategist, Tom Block, for his take on the CNN interview and the chances for a deal within the next few weeks.  His take is that a deal is possible, as long as House Democrats focus on the realistic components of their bill.

– a deal, if it comes together, would only “take days to pass a bill”

This is the key reminder, there are some things that are quite binary for markets and outcomes.  A stimulus plan is one of them.  Healthcare/therapeutic progress is another.  So, we think this is the reason not to get too bearish. 




POINT 1: Daily cases flat.  Mix shift as 22 states “last set of states” to see COVID-19 prevalence
Daily new COVID-19 cases Sunday came in at 34,898, which is -35 lower vs 7D ago. Daily cases for the past 5 days have been essentially flat (vs. 7D ago).

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.  The daily cases have been flat on 7D delta for the past 5 days. 

Source: COVID-19 Tracking and Fundstrat 



We see US COVID through 4 tiers of US states:

– Wave 1 –> NY tristate areas (inc. RI and MA)
– Wave 2 –> F-CAT (FL, CA, AZ, TX)
– Tag along with Wave 2 –>
– “still facing outbreak” –> 22 states relatively lower COVID prevalence

Below is the 7D delta of the weekly cases for those 4 tiers.  And as you can see, the rise in weekly cases vs 7D ago is essentially all in the 4th tier — states with low case prevalence.  And it is these states seeing a rise in cases. 

– “Still facing outbreak” states saw +8,995 more weekly cases vs 7D ago
– NY Tristate is also seeing a modest rise (+864)
– F-CAT is -7,010 vs 7D ago

Source: COVID-19 Tracking and Fundstrat  



F-CAT, which of these does not look like the other? hint –> CA
Florida announced Friday, the lifting of all restrictions around COVID-19 (see below).  And this is prompted, in part, by the fact that daily cases are so far off their peaks.  For the epicenter states of FL, CA, AZ, TX, here is the % off from their peak:

– FL  -88%
– CA -65%
– AZ -92%
– TX -88%

Notice how CA is seeing a resurgence? 

There are factors specifically hurting CA:
– Wildfires affect the ability to social distance and use of PPE
– Back to school
– Still high exposure to the border and imported cases

Source: COVID-19 Tracking and Fundstrat

Source: COVID-19 Tracking and Fundstrat




POINT 2: COVID-19 positivity rates at many universities below state averages… Yup
There has been a lot of criticism of colleges and universities because of the rise in cases in their campuses.  And while some of the criticism is warranted, such as students disregarding restrictions, there seems to be an overly negative view on the results for schools.  Last week, we commented how we are now more a month into the school year, and yet, there does not seem to be any sustained outbreaks.  

– Sure, there are going to be cases, because COVID-19 is still spreading
– But the key question is whether schools/colleges can limit spread better than cities/counties locally.

We think this answer seems to be “yes” for many schools.  In fact, from the data provided by our data science team, led by tireless Ken, it seems as if colleges have actually done a very good job of containing cases.  This is because of extensive testing and also because college campuses are somewhat closed loops, relative to a general economy with commuters.  Thus, one could argue that returning to campus is a better way to manage young people’s movements and of course, preserve their educational experience.


The way to judge this, in our view, is twofold:
– what is the trend of daily cases in a college?
– is the positivity rate lower or higher than that reported by a state?

Looking at 3 colleges, COVID-19 seems well managed…
We took two large schools which have a high number of cases and also a college right in the heart of NYC:
– University of Texas, Austin
– University of Georgia
– NYU


UT Austin positivity rate 1.8% vs 6.0% for the state of Texas
UT Austin is one of the largest schools in Texas and is in Travis County, which we know is one of the counties with the highest COVID-19 prevalence.  The school has reported about 1,200 cases.

– daily cases have been falling sharply since 9/15
– so despite a surge as the school year started, we have not seen this exponentially grow
– the latest positivity rate is 1.8%, way lower than the overall state of Texas positivity rate of 6.0%

Source: University of Texas Austin

Source: University of Texas Austin

Source: Fundstrat



University of Georgia positivity rate is 3.5% vs 7.4% for state of Georgia
University of Georgia has the largest number of cases in the state of Georgia with about 3,500 cases so far.

Source: NY Times

But as the University of Georgia data shows, daily cases peaked in the first week of September and since then, daily cases have been steadily falling.  

– Weekly cases peaked at 1,500 first week of September
– Recent weekly cases 163

So you can see, there has not been a sustained outbreak lasting more than a week at the University of GA.

Source: University of Georgia


In fact, positivity rates have fallen from 9% in early Sept to 3.5% in the most recent reported week.  This is still somewhat high, but 1/3 from its peak.

Source: University of Georgia


And this 3.5% is less than half of the state of GA overall.  Thus, one can argue U of GA campus is safer than the state overall.

Source: Fundstrat


And also far, there has been virtually no hospitalizations in GA.  As shown below, there is few if any.

Source: University of Georgia


NYU positivity rate is 0.41% vs 0.96% for the state of New York
Even NYU, a school right in the heart of Manhattan has seen startlingly few cases.  The University has about 15,000 students on campus and the total cases since the opening is ~100.  And as shown below, the daily positivity rate is 0.41% on ~10,000 tests.  

– by comparison, the state of New York has a most recent positivity rate of 0.96%

So bottom line, colleges seem safer than the corresponding city/state.

Source: NYU

Source: NYU




POINT 3: Florida is the first “epicenter” state to lift all restrictions
Florida is the first major state in the US to lift all restrictions on COVID-19.  FL Governor Ron DeSantis signed an executive order on 9/25 (20-244) effectively rescinding all executive orders on COVID-19 and eliminating associated penalties.  This is a big deal, because Florida is one of the largest states in the US and among the top 5 most impacted by COVID-19.  

Source: NPR.org

The motivation for this executive order seems to be both a realization of the catastrophic economic consequences of the prior restrictions, and also a recognition that COVID-19 cases have been flattening within the state.  The executive order is 3 pages but the two pages of details are shown below.

– apparently, this means no masks required
– no fines for non-compliance with social distance
– no limits on groups

https://www.flgov.com/2020-executive-orders/

https://www.flgov.com/2020-executive-orders/


How cities and counties deal with their own restrictions is still not known at this time.  For instance, Broward County Mayor Dale Holness (Fort Lauderdale) commented that they hope the governor can allow the county to have deeper restrictions.  

Source: NPR.org

Florida has seen daily cases slow sharply in the past month versus the prior waves, but the state still has ~2,700 daily cases of COVID-19.  This works out to about 124 daily cases per 1mm residents.  The state is about 3X the state of NY but is actually better than most states.

Source: COVID-19 Tracking Project



The chart below shows daily cases per 1mm residents (3D avg) by state.  And as you can see, FL and the major states such as NY tristate, and “epicenter” states like FL, CA, AZ, TX, or F-CAT, are at the lower end of daily cases per 1mm residents.  

– FL and Rhode Island have similar daily case figures.  

Source: COVID-19 Tracking Project

Florida is already nearly two months into flu season (see below) and the fact that daily cases have been muted is a good thing, considering we are already in the flu season.

Source: CDC and Fundstrat


Lastly, Florida still records about 100 deaths per day from COVID-19.  So, there is still a daily tragedy and toll from this disease in the state.  But the trend in daily deaths looks to be trending lower, even as flu season is underway.

Source: COVID-19 Tracking Project