3 anecdotal signs COVID-19 might be closer to "endemic" than consensus believes = positive bias. Re-balance Granny Shots --> +13 adds, -9 deletes. YTD outperforms +404bp

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

We are shifting to a 4-day a week publication schedule:

Monday
Tuesday
Wednesday
SKIP THURSDAY
Friday

STRATEGY: COVID-19 might be closer to “endemic” than consensus believes = positive bias

COVID-19 cases have been <100K for 6 of the last 7 days = good sign
Trends in COVID-19 cases in the US have been promising.  As shown below, daily cases have been below 100,000 for 6 of the last 7 days.  Thus, cases have been falling steadily in the US.  This is even as the Delta-plus variant AY.2.4 has been detected in multiple states.

The 7D avg in cases is down to 69,331 and as we noted last week, this is looking to be on track for 50,000 by the end of the month.  This is certainly a positive trend in cases, particularly considering the seasonals in the Northeast would suggest cases should be surging.

Cases are still rising in 9 states in the US
Of the 50 states, only 9 seem to be seeing a rise in cases.  These are shown below and all are in the northern part of the US:

– PA, ME, VT, NH, MI, MN, WI

– Why is PA seeing a rise in cases but not NY, NJ or CT?
– Why is VT, NH, ME seeing a surge in cases but not MA?

This is part of the mystery of COVID-19.

The southern states in the US are seeing a continued collapse in cases.  This is encouraging because if one is worried about the Delta variant and Delta-plus, these states are seeing very promising trends.  Cases are improving nicely.

ENDEMIC: The transition from pandemic to endemic needs to be made by policymakers
We have been living in the COVID-19 pandemic-era for nearly two years.  Recurring waves of infections driven by variants, have created disruptions and stressed the mental health of citizens around the world.  But at some point, COVID-19 will shift from being a pandemic to an endemic disease. The VOX.com article below is a good discussion and I want to highlight a few things:

– Endemic has many definitions, but think seasonal flu
– One way to contextualize is R0, or reproductive number, drops to 1.0 (not there currently)

– In the US, when this level is reached, state policymakers are likely to be the first to declare the end to the pandemic
– and later, the CDC will make a similar declaration nationally

So, a few takeaways.  If COVID-19 moves to the endemic stage, it bears watching the state actions.  And as the number of states making such a declaration rose, it will become apparent that COVID-19 is effectively moving to endemic status.  That is a good thing because it is a pretext for a return to “true normalcy.”

3 Anecdotal signs COVID-19 is closer to “endemic” status…
Over the weekend, three developments caught our eyes.  We view these as anecdotal signs that COVID-19 is becoming endemic.  While this is simply “language gymnastics,”  what we mean is that the threat from COVID-19 is diminishing at a pace that seems faster than the media or the policymakers recognize.  This is a positive divergence:

– Thailand is allowing quarantine-free travel to Thailand from 46 nations –> big change
– Performer Ed Sheeran catches COVID-19 and still tour, but “virtually” –> doesn’t cancel, audiences still gather
– UK Chancellor rules out new WFH restrictions, despite Delta-plus surge

The reaction function to these events is a marked contrast to how policymakers and the public would have reacted a year ago.  This is a sign that COVID-19 is arguably closer to endemic status than the public realizes.  This is a good thing.

Asia is a lot more vaccinated than the USA –> USA ranks #51 globally
Thailand is opening its borders fully to 46 nations.  We have listed the top 60 most vaccinated nations below, based on “fully vaccinated” as deemed currently (no boosters):

– Thailand figure is 38%, or ranks #81
– USA at 58% is #51
– So many Asian nations are far higher (shaded red)

This table shows that vaccination progress globally has been impressive.  And in this context, this is arguably the 4th anecdotal data point to suggest COVID-19 is closer to endemic than we realize.

STRATEGY:  Quarterly re-balance “Granny Shots” –> +13 adds, -9 deletes.  30 stocks.  +404bp YTD outperformance
Our base case remains for an “everything rally” into YE.  There are multiple factors supporting this including the positive seasonals, evidence of pent-up demand, supportive Fed, signs the supply chain “glitches” are easing and positive trends in COVID-19.

We also believe our “Granny Shots” portfolio remains good ballast in a portfolio.  The Granny Shots is based on identifying stocks that fall within 6 tactical/thematic portfolios and then applying a quantitative screen to find the strongest stocks.  

–  YTD Granny Shots outperforming by +404bp
–  2020 Granny Shots outperformed by +3,015bp
–  2019 Granny Shots outperformed by +879bp

So, 2021 has still seen strong performance by Granny Shot, but not as robust as 2020.

As the chart below shows, the monthly returns for Granny Shots has been choppier, but it is evident that Granny Shots has generally been stronger when the market is rallying.  Thus, it is a “pro-risk” portfolio. 

GRANNY SHOT REBALANCE: 13 additions, 9 deletions
Note: As of October 25th 7:50 AM, our Granny Shots stock list page is currently being updated, and thus does not reflect our latest rebalance. Please reference to the note below for the updated data. Your patience is greatly appreciated.

Our data science team, led by tireless Ken, has updated the 4Q2021 quarterly rebalance for Granny Shots.  In this rebalance:

– stocks added +13
– stocks deleted -9
– additions were in Epicenter groups –> Discretionary, Energy, Financials, Technology + Communication Services

We have listed the “additions” and “deletions” below.  And the additions were added in 5 sectors.  These are all Epicenter aka Cyclical.  These additions are consistent with our macro tilt.  And as shown, the deletions were heavier in Healthcare and Consumer Staples.

13 Additions:
– Discretionary:AAP 0.21% , AZO -0.90% , PHM -1.32% , ROST 0.56% , ULTA
– Technology:AVGO 1.19% , KLAC -0.97% , TXN
– Energy: EOG 0.01% , MPC 0.04%
– Financials:USB, WRB
– Comm. Services:ATVI9

Deletions:
– Staples: CL -0.34% , CLX -0.37% , PG -0.21%
– Healthcare: BIIB 0.76% , GILD -0.79% , REGN -1.41%
– Technology: NTAP 1.03%
– Discretionary: LOW -0.15%
– Industrials:UPS


30 Granny Shot Ideas:
Discretionary: 
AAP 0.21% , AMZN -0.82% , AZO -0.90% , GRMN -0.07% , PHM -1.32% , ROST 0.56% , TGT, TSLA -1.86% , ULTA

Communication Services:
GOOG -1.13% , ATVI

Technology:
MSFT 0.39% , AAPL -0.02% , NVDA -0.72% , AVGO 1.19% , CSCO 1.73% , KLAC -0.97% , PYPL -2.99% , QCOM -0.36% , QRVO -1.59% , TXN, XLNX

Financials
AXP 0.37% , USB, WRB

Energy
EOG 0.01% , MPC 0.04% , PSX 1.22%

Consumer Staples
BF/B, PM 0.24%

30 Granny Shot Ideas:
AAP 0.21% , AAPL -0.02% , AMZN -0.82% , ATVI, AVGO 1.19% , AXP 0.37% , AZO -0.90% , BF/B, CSCO 1.73% , EOG 0.01% , GOOG -1.13% , GRMN -0.07% , KLAC -0.97% , MPC 0.04% , MSFT 0.39% , NVDA -0.72% , PHM -1.32% , PM 0.24% , PSX 1.22% , PYPL -2.99% , QCOM -0.36% , QRVO -1.59% , ROST 0.56% , TGT, TSLA -1.86% , TXN, ULTA, USB, WRB, XLNX

POINT 1: Daily COVID-19 cases 12,017, down -2,324 vs 7D ago…

Current Trends — COVID-19 cases: 

• Daily cases   12,017 vs 14,341 7D ago, down -2,324
• Daily cases ex-FL&NE   12,017 vs 12,677 7D ago, down -660
• 7D positivity rate  5.0% vs 5.1% 7D ago
• Hospitalized patients   51,310, down -4.9% vs 7D ago
• Daily deaths  1,438,   up +17.8% vs 7D ago

*** Florida and Nebraska stopped publishing daily COVID stats updates on 6/4 and 6/30, respectively. We switched to use CDC surveillance data as the substitute. However, since CDC surveillance data is subject to a one-to-two day lag, we added a “US ex-FL&NE” in our daily cases and 7D delta sections in order to demonstrate a more comparable COVID development.

The latest COVID daily cases came in at 12,017, down -2,324 vs 7D ago. The Columbus Day distortion appears to be fully cleared out. And, as seen below, cases are currently rolling over

Rolling 7D delta in daily cases remains negative…
The rolling 7D delta remains negative as the Columbus Day distortion appears to be fully cleared out.

Low vaccinated states seem to have a larger increase in daily cases compared to their recent low…
*** We’ve updated the “Parabolic Case Surge Tracker” to measure case % off recent peak as the more recent “delta surge” is rolling over. 

In the table, we’ve included both the vaccine penetration, case peak information, and the current case trend for 50 US states + DC. The table is sorted by case % off of their recent peak.
– The states with higher ranks are the states that have seen a more significant decline in daily cases
– We also calculated the number of days during the recent case surge
– The US as a whole, UK, and Israel are also shown at the top as a reference

Hospitalizations, deaths, and positivity rates are rolling over amidst case rollover…
Below we show the aggregate number of patients hospitalized due to COVID, daily mortality associated with COVID, and the daily positivity rate for COVID.

– Net hospitalizations peaked below the Wave 3 peak and are currently rolling over 
– Daily death peaked slightly above the Wave 2 peak and are currently rolling over
– As per the decline in daily cases, the positivity rate is currently rolling over 

POINT 2: VACCINE: vaccination pace trending up once again…

Current Trends — Vaccinations: 

• avg 0.8 million this past week vs 0.8 million last week
• overall, 57.0% fully vaccinated, 65.8% 1-dose+ received

Vaccination frontier update –> all states now near or above 80% combined penetration (vaccines + infections)
*** We’ve updated the total detected infections multiplier from 4.0x to 2.5x. The CDC changed the estimate multiplier because testing has become much better and more prevalent. 

Below we sorted the states by the combined penetration (vaccinations + infections). The assumption is that a state with higher combined penetration is likely to be closer to herd immunity, and therefore, less likely to see a parabolic surge in daily cases and deaths. Please note that this “combined penetration” metric can be over 100%, as infected people could also be vaccinated (actually recommended by CDC). 

– Currently, all states are near or above 80% combined penetration
– Given the new multiplier. only RI, FL, MA, CT, NM, NY, NJ, IL, CA, PA, DE, SD, KY, and UT are now above 100% combined penetration (vaccines + infections). Again, this metric can be over 100%, as infected people could also be vaccinated. But 100% combined penetration does not mean that the entire population within each state is either infected or vaccinated

Below is a diffusion chart that shows the % of US states (based on state population) that have reached the combined penetration >60%/70%/80%/90%/100%. As you can see, all states have reached combined infection & vaccination >100% (Reminder: this metric can be over 100%, as infected people could also be vaccinated. But 100% combined penetration does not mean that the entire population within the state is either infected or vaccinated).

There were a total of 782,620 doses administered reported on Sunday, down 3% vs. 7D ago. While we are seeing the vaccination pace slow down, we believe it may soon pick back up as booster shots are becoming more widely available. Also, the same catalysts remain in place:

– Proof of vaccination required by many US cities and venues
– Booster shots
– Full FDA approval of Pfizer COVID vaccines (hopefully it could help overcome vaccine hesitancy)
– Biden’s vaccination plan

The daily number of vaccines administered remains the most important metric to track this progress and we will be closely watching the relevant data.

73.9% of the US has seen 1-dose penetration >60%… 
To better illustrate the actual footprint of the US vaccination effort, we have a time series showing the percent of the US with at least 45%/45%/50% of its residents fully vaccinated, displayed as the orange lines on the chart. Currently, 100% of US states have seen 40% of their residents fully vaccinated.  However, when looking at the percentage of the US with at least 45% of its residents fully vaccinated, this figure is 97.3%. And only 81.9% of US (by state population) have seen 50% of its residents fully vaccinated.

We have done similarly for residents with at least 1-dose of the vaccination, denoted by the purple lines on the chart. While 98.9% of US states have seen 1 dose penetration >50%, 90.6% of them have seen 1 dose penetration >55% and 73.9% of them have seen 1 dose penetration > 60%.

This is the state by state data below, showing information for individuals with one dose and two doses.

The ratio of vaccinations/ daily confirmed cases has been falling significantly (red line is 7D moving avg). Both the surge in daily cases and decrease in daily vaccines administered contributed to this.

– the 7D moving average is about ~13 for the past few days
– this means 5 vaccines dosed for every 1 confirmed case

In total, 407 million vaccine doses have been administered across the country. Specifically, 218 million Americans (66% of US population) have received at least 1 dose of the vaccine. And 189 million Americans (58% of US population) are fully vaccinated.

POINT 3: Tracking the seasonality of COVID-19

In July, we noted that many states experienced similar case surges in 2021 to the ones they experienced in 2020. As such, along with the introduction of the more transmissible Delta variant, seasonality also appears to play an important role in the recent surge in daily cases, hospitalization, and deaths. Therefore, we think there might be a strong argument that COVID-19 is poised to become a seasonal virus.
The possible explanations for the seasonality we observed are:

– Outdoor Temperature: increasing indoor activities in the South vs increasing outdoor activities in the northeast during the Summer
– “Air Conditioning” Season: similar to “outdoor temperature”, more “AC” usage might facilitate the spread of the virus indoors

If this holds true, seasonal analysis suggests that the Delta spike could roll over by following a similar pattern to 2020.

We created this section within our COVID update which tracks and compare the case, hospitalization, and death trends in both 2020 and 2021 at the state level. We grouped states geographically as they tend to trend similarly.


CASES
It seems as if the main factor contributing to current case trends right now is outdoor temperature. During the Summer, outdoor activities are generally increased in the northern states as the weather becomes nicer. In southern states, on the other hand, it becomes too hot and indoor activities are increased. As such, northern state cases didn’t spike much during Summer 2020 while southern state cases did. Currently, northern state cases are showing a slight spike, especially when compared to Summer 2020. This could be attributed to the introduction of the more transmissible Delta variant and the lifting of restrictions combined with pent up demand for indoor activities. 

HOSPITALIZATION
Current hospitalizations appear to be similar or less than Summer 2020 rates in most states. This is likely due to increased vaccination rates and the vaccine’s ability to reduce the severity of the virus.

DEATHS
Current death rates appear to be scattered compared to 2020 rates. This is likely due to varying vaccination rates in each state. States with higher vaccination rates seem to have lower death rates given the vaccine’s ability to reduce the severity of the virus; states with lower vaccination rates seem to have higher death rates.