COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet

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

STRATEGY: Stimulus is singular focus next 48 hours.  HY Defaults peaked? = Risk-on
As we start a new trading week, I would view weekend developments as mostly positive both on COVID-19 and on fiscal stimulus.  COVID-19 daily cases seem to have broken trend over the past two days, being flat/down compared to the intensifying gains seen in the prior 10 days.  So, is this a merely statistical aberration (WI did not report over the weekend) or are we hitting that “peak velocity” of cases that typically spur action?  I am not sure, but a break in trend is a good thing, nevertheless.  

COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet


Source: Fundstrat and COVID-19 Tracking Project


But the far bigger story is it looks like fiscal stimulus is in the “short strokes” (golf analogy) and the House giving the White House 48 hours to agree to a deal.  While this might sound like an impossible task, this is also giving us some finality.

– So for the next 48 hours, the only thing equity markets will focus on is fiscal stimulus

COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet



Source: NY Post


But this package is way overdue.  With benefits ending and the economy still not fully opened, millions of Americans need a financial bridge.  As this USA Today story headlines, 6 million households missed their rent or mortgage payment.  For anyone dependent on a friendly vote in November, it would be wise to get these Americans a needed lifeline.

COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet
COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet


Source: USA Today


Major risk-on signal –> HY Defaults likely peaked this cycle.
JPMorgan’s Fixed Income team made a very interesting comment this week.  Their strategists suggest that US High-yield defaults have peaked for this cycle.

WOW

This is a significant statement.  High-yield is a close cousin of equities.  And this economic depression has led to a surge in defaults in HY.  But now, it looks like this cycle has peaked.  

COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet


Source: JPMorgan Research


– If so, this is a major risk-on signal.
– Coupled with 3Q2020 signalizing EPS nadir is past
= Expect a sustained post-election rally



POINT 1: Phew? Last 2 days, COVID-19 cases flat (vs 7D ago)
The latest COVID-19 daily cases came in at 46,582, down -807 vs 7D ago.  The last 2 days have seen daily cases flat vs 7D ago, so this is a way better trend than the surges seen last week.

– But WI and MS did not report on Sunday and this is probably ~2,000 cases
– So, instead of being down, daily cases are probably flat

COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet


Source: COVID-19 Tracking Project  and Fundstrat



As you can see, WI is doing some system maintenance and so daily cases were not reported.

COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet


Source: Twitter


US daily cases 7D delta is up but not exponential…
Again, the daily change vs 7D ago, in our view, is the leading indicator as it is what influences the 7D moving average.

– As you can see below, the 7D delta in daily cases is flat last few days
– This is not an exponential surge, which is good
– It has not yet happened, but it could
– Next few weeks are key
– As we wrote last week, some states seem to be hitting the “upper limit” of daily case velocity
– Meaning, we could see cases slow within the next few weeks

COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet


Source: COVID-19 Tracking and Fundstrat  


COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet
COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet
COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet


Source: COVID-19 Tracking and Fundstrat




POINT 2: Wave 3 not causing panic, because no state overwhelmed by hospitalizations or deaths…
Policymakers are not panicking in wave 3, because there is nothing to panic about (yet)…

US COVID-19 cases are at a high level, and potentially rising (hopefully peaking by the end of the month).  And this wave 3 of cases is somewhat different, because it is principally driven by new cases in the states which previously had low prevalence.  We discuss in this section how hospitalizations and deaths are actually quite low overall, and not concentrated in any state — this contrasts with wave 1 and wave 2.


Wave 1 (Feb-April 2020)  –> NY tristate + MA + RI
– hospitalizations and deaths concentrated in 5 states

Wave 2 (June-July 2020) –> FL, CA, AZ, TX, or F-CAT
– hospitalizations and deaths concentrated in 4 states

Wave 3 (now)  –> 22 states facing outbreak
– hospitalizations and deaths not concentrated in any particular state


Daily cases were clearly concentrated in a handful of states in wave 1 and wave 2 but not wave 3
Look at the daily cases in wave 1 and wave 2, and we can see many states with >5,000 cases:
– Wave 1 –> NY
– Wave 2 –> FL, CA, TX
– Wave 3 –> none

So from a daily case perspective, no single state is standing out.  And thus, at this time, no governor and mayor are panicking.  But this does not mean they should not be alarmed.  Daily cases are rising, and this suggests the R0 >1.0 and it could accelerate if Americans get too lax.  And we know cases are rising throughout the US.


COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet


Source: COVID-19 Tracking Project and Fundstrat


Hospitalizations and Deaths are muted compared to wave 1 and wave 2…
The bigger contrast is regarding hospitalizations.  In wave 1 and wave 2, there were many states with extremely high levels of hospitalization usage and daily deaths.  It was this horrific toll that caused many Americans to take action.  In NYC, for instance, hospitals were even forced to use refrigerated trucks to store bodies.  So, this is what made wave 1 and even wave 2 visibly deadly. Take a look at hospitalizations below:

– Wave 1, Hospitalization levels were incredibly high in NY, NJ and MA
– Wave 2, Hospitalization levels were very high in FL, CA, TX and even AZ
– Wave 3, no state is matching these incredibly high levels

This is also not a forecast for the future.  The level of hospitalizations could rise in the coming weeks.  Moreover, these figures cited are based upon total levels of hospitalization.  But in aggregate, this is the level that matters.


COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet


Source: COVID-19 Tracking Project and Fundstrat


Deaths lag hospitalizations by 14-16 days as the chart below highlights.  So, if hospitalizations are ticking up, we should now be looking for daily deaths to start rising.  This is not happening currently, but it could in the coming weeks. 

COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet


Source: COVID-19 Tracking Project and Fundstrat

Currently, no single US state has >100 daily deaths, unlike wave 1 and wave 2
But similar to the chart on hospitalizations, there are not any concentrated areas of mortality.  Since deaths generally follow hospitalizations, the fact that hospitalizations have not surged, means daily deaths should not be surging.

– Wave 1, 6 states reported >100 daily deaths per day
– This was fueled by COVID-19 sweeping through nursing homes
– Wave 2, 3 states reported >100 daily deaths
– So, daily deaths were significantly more contained in wave 2
– Wave 3, no state has >100 daily deaths

The takeaway, in our view, is that this is a different surge in cases.  This could morph and turn into a greater level of hospitalization and death rates.  But this has not yet happened.


COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet


Source: COVID-19 Tracking Project and Fundstrat 



POINT 3: Is Sturgis Rally behind ‘wave 3’?
The Washington Post had a great article about the possible post-COVID-19 impact of the Sturgis Motorcycle rally, held in Sturgis, SD (WP article here).  They have some good anecdotes to suggest that this event is probably responsible for the surge in cases in the Mountains region of the US.  But the timing of this rally, August 7th-16th, also coincided with back to school.  So, it is difficult to know exactly how much of this is Sturgis, particularly as little contact tracing has been conducted.  Much of the data is from a non-profit, newdata.org, and we have a few exhibits from their study.

– This event is controversial, because it drew participants from across the nation and this was a purely social event
– While BLM and other protests drew similarly large crowds, scientists and policymakers view this event with a different lens, because of the social nature of this event.

COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet
COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet

Source: Washington Post




Sturgis is a small town of 7,000 in the Mountains region of the US.

COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet

Source: Google


And the Sturgis rally has been taking place for more than 82 years and is the state’s largest annual event.  But this event is a legend for motorcycle enthusiasts, and even I know two people who have mentioned friends/relatives that attended this event.  So, while I had never heard of it before, it is clearly legendary.

COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet

https://www.blackhillsbadlands.com/blog/rich-history-sturgis-motorcycle-rally

COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet


https://www.blackhillsbadlands.com/blog/rich-history-sturgis-motorcycle-rally


The town itself is about 7,000 residents and this event draws >400,000 visitors annually.  And according to the WP article, the boost to the town revenues is about $2 million, so it is a significant event. 2020 attendance is similar to 2019, so COVID-19 did not keep many attendees away.

COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet


Source: DOT and Wikipedia


This event runs over a few days and does involve many social gatherings.  And while most of the events are outdoors, because this is a highly social event, there is a lot of alcohol and people in close proximity for extended periods of time.  So, I would not be surprised if there were cases from this event. And as we know from multiple studies, the rapid spread of COVID-19 takes place due to super spreaders, who tend to be symptomatic people spreading it to many.  The latest breakout at the White House is an example of that.


The top chart is the estimated locality of the Sturgis attendees, based on “residents per capita” — in other words, measuring the density of the attendees.  And as highlighted on that chart, the bulk of attendees are from 6 states:

– South Dakota
– North Dakota
– Montana
– Nebraska
– Wyoming
– Minnesota

COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet


Source: newdata.org


Below is a chart made by our data science team, plotting a heatmap of states, based upon “daily case increase per 1mm residents” and the redder the state, the greater the increase.  As you can see, the surge in US cases is coming from these same clusters of states.  But what makes this somewhat curious is:

– the Sturgis rally was 8/7-8/16, or 8 weeks ago
– this surge of cases really starting surging in the last two weeks
– so it was a 6 week lag between the event and this surge


COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet
COVID-19 UPDATE: Phew. Daily cases flat/down last 2 days. Policymakers are not panicking about wave 3, because there is nothing to panic about yet


Source: COVID-19 Tracking Project and Fundstrat

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