COVID-19 UPDATE: COVID-19 cases rising linearly, not exponentially --> tentatively a good thing. The more we churn, the greater the post-election rally.

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

HEADS UP: There will be no updates Friday and no updates next Monday. I will be getting surgery to repair my ACL on 10/22 and will be recovering on those dates. 


STRATEGY: Markets implying fiscal deal a “binary event” but it is “when not if”
The more we churn, the larger the post-election rally…

One of the top market rules for me, maybe even “rule #1,” is never to try to impose my views on the markets.  And it is perhaps more useful to try to decipher the message from market behavior (sadly, stocks can choose to speak any language it chooses… lol).  And if I had to describe equities over the past three days, it seems to be treating fiscal stimulus as a binary event.  

If it doesn’t happen this week, it is bad
If it happens this week, it is good

For the millions of Americans with benefits expiring, this is truly critical.  Those who need this next installment of payments are those who are relying on the US for the safety net. So the social implications are sizable.

But if a deal doesn’t come together this week (possible and House Speaker Pelosi is optimistic), a deal will happen before year end.  So while there are high stakes from a social net perspective, there should be less at stake for equities.  In other words, it does entirely make sense to me that stocks are stuck in neutral and seem to pivot on fiscal stimulus updates.  But I revert to the rule #1, I can’t tell markets what to do.

But given the fairly robust incoming economic data, and the high levels of cash on the sidelines, and given the high anxiety into elections, this surely seems to be a set-up for a pretty big post-election rally.  The more we churn here, the more impressive the post-election surge.



We are still in wave 3 of COVID-19 in the US.  And this wave, so far, is primarily a spread of cases in states that were largely unscathed in wave 1 (NY tristate +MA +RI) and wave 2 (FL, CA, AZ, TX, or F-CAT along with 19 tag along states).  And this means COVID-19 is finding its way into areas of the US which are “caught off guard.”  

So part of the key over the next few weeks is for policymakers and citizens in these 20-ish states to “panic enough” to reduce the spread.  There must be some of this taking place already, as daily cases are rising on a 7D basis (+5,938 vs 7D ago) but not soaring exponentially.  And even states like South Dakota and North Dakota might already have reached peak velocity.

And wave 3 is showing some rises in wave 1 and wave 2 states, but to a far, far lesser extent.  And hospitalizations are barely rising in wave 1 and wave 2 states.  So I think it is more correct to view this wave 3 as rolling through “new territory.”  In fact, the positivity rate in the US is 6.2% right now, well below 9% of wave 2, and in the wave 1 and wave 2 states, positivity rates are very low.

So on balance, I am probably feeling a bit better about COVID-19 this week, despite the fact that cases are rising and we could see 70,000 daily cases within a few weeks.



POINT 1: Daily cases 58,421, up 5,938 vs 7D ago — on track to hit 70,000 in two weeks
The latest COVID-19 daily cases came in at 58,421, up +5,938 vs 7D ago.  Today’s figures are probably understated:
– GA and AL did not report today

The trend of cases is rising, something happening for the past few weeks, and our overall takeaways are:
– US cases could reach 70,000 within 2 weeks, matching the July highs
– Because the spread is primarily in 11 states, we might be nearing peak velocity in those states (daily cases per 1mm >500 trigger policy response)
– Hospitalizations are more important, in our view, and while hospitalizations are rising, the levels are still quite low

COVID-19 UPDATE: COVID-19 cases rising linearly, not exponentially --> tentatively a good thing. The more we churn, the greater the post-election rally.


Source: COVID-19 Tracking Project  and Fundstrat


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.
– Daily cases are rising vs 7D ago, but the rate of increase is been constant.
– It does not seem to be accelerating (becoming exponential), which is key

COVID-19 UPDATE: COVID-19 cases rising linearly, not exponentially --> tentatively a good thing. The more we churn, the greater the post-election rally.


Source: COVID-19 Tracking and Fundstrat  


Today saw a pretty big jump in NY state.  This is interesting.

Look at the drops today, SD and ND which have been surging are posting a surprising decline.  This ties back to our statement of states hitting peak velocity.

COVID-19 UPDATE: COVID-19 cases rising linearly, not exponentially --> tentatively a good thing. The more we churn, the greater the post-election rally.
COVID-19 UPDATE: COVID-19 cases rising linearly, not exponentially --> tentatively a good thing. The more we churn, the greater the post-election rally.
COVID-19 UPDATE: COVID-19 cases rising linearly, not exponentially --> tentatively a good thing. The more we churn, the greater the post-election rally.

Source: COVID-19 Tracking and Fundstrat




POINT 2: Hospitalizations rising 16 states, not NY tristate, not F-CAT
We have said this a few times over the past few weeks, but it is worth repeating again.  Hospitalizations are increasingly a better measure of COVID-19 spread and severity.  There are several reasons for this:

– expanded testing is leading to more detected cases, but not necessarily meaning rising infection
– wide scale testing at schools, offices, certain businesses, mean we will see greater detection
– there are many testing PCR positive but are recovered

So we think measuring hospitalizations is a more important measure.  The chart is from our daily Chartbook, slide 12, and has grouped the states by the 4 tiers we typically refer to:

– wave 1, NY tristate (+MA +RI)
– wave 2, FL, CA, AZ, TX or F-CAT 
– wave 3, “still facing outbreak” states (low prevalence)

We have highlighted the 16 states where hospitalizations are rising.  And as you can see, 13 of the 16 are in the states falling in that category of “low prevalence, thus, still facing outbreak”

– Notably, none of the wave 1 and wave 2 states are facing surging hospitalizations.

COVID-19 UPDATE: COVID-19 cases rising linearly, not exponentially --> tentatively a good thing. The more we churn, the greater the post-election rally.


Source: COVID-19 Tracking Project and Fundstrat


The good news is that hospitalizations are not resulting in the same coefficient of mortality.  In fact, as Dr. Scott Gottlieb points out in the tweet below, death rates are falling across the board.  This is a good development.

COVID-19 UPDATE: COVID-19 cases rising linearly, not exponentially --> tentatively a good thing. The more we churn, the greater the post-election rally.


Source: https://twitter.com/scottgottliebmd/status/1318656252835209217?s=12



POINT 3: Positivity rate is creeping up, but at 6.2%, still shows COVID-19 managed
The overall positivity rate in the US is creeping up ever so slightly but is hovering around 6%.  Per the WHO, a positivity rate at 5% is considered a well managed level, because testing is more than adequately detecting cases.  In fact, sub-10% level is considered good.

– the waves 1 and 2 peaked at much higher levels
– so if wave 3 remains below wave 2 levels, we would view this as testing capacity is keeping and detecting cases

COVID-19 UPDATE: COVID-19 cases rising linearly, not exponentially --> tentatively a good thing. The more we churn, the greater the post-election rally.

Source: COVID-19 Tracking Project and Fundstrat


It probably makes more sense to look at positivity rates by state.  After all, since testing is local, we can look at which states are managing case spread well.  And as you can see, many states are currently above 10%:

– the 21 states are pretty the ones we all know are seeing an outbreak
– the “outliers” are Maine (28.9%) and Florida (11.5%) which are not really seeing case outbreaks
– But any states >10% positivity needs to be expanding testing

By contrast, 10 states have positivity rates below 5% and are states where one could say testing infrastructure is helping manage the spread.

COVID-19 UPDATE: COVID-19 cases rising linearly, not exponentially --> tentatively a good thing. The more we churn, the greater the post-election rally.

Source: COVID-19 Tracking Project and Fundstrat 

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