Is COVID-19 seasonal? "July chop" underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

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STRATEGY: Don’t be a hero, but 2H2021 setting up for a rally
Over the past 29 years of equity research, if there is one lesson I have learned –> it’s difficult to make money in stocks in July. Hence, another reasons we have advised clients about “July chop”

In short, we just don’t think investors need to be a “hero” in July and try to make $$$. It reminds us of a 1974 song by Paper Lace called “Billy don’t be a hero” — a song about a soldier and admonishments not to be a hero in a ferocious battle. That is what this July reminds us of:

– COVID-19 cases are surging
– Delta variant raising concerns virus is evading vaccines
– But our data suggests that COVID-19 might actually be “seasonal”

– if so, equity markets bottomed 20 days before “cases peaked” in 2020 Wave 2
– In 2021, cases are surging now and stocks will bottom 3 weeks before cases peak

Key question –> when will USA cases peak?

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

Source: Paper Lace, UK

…Is US COVID-19 seasonal? There is a remarkable seasonal pattern…
US COVID-19 cases are surging, stemming from a parabolic surge in Delta variant. Daily cases hit nearly 60,000 today and are on track to reach 100,000 in the next few weeks:

– we warned a few weeks ago the US could see a surge in cases patterning after UK/Israel
– if we match those nations, cases could surge to 100,000

– cases are not that far from 100,000, surging to 57,633 today

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

…US is outperforming UK, as case rise hardly matching amplitude of UK
The reality is the US is tracking better than the UK. As shown below, the US cases are rising and in sync with the rise in UK, but the amplitude is far lower:

– UK surge equivalent is USA getting to 200,000 cases
– we think this magnitude is possible but so far seems far more linear

– future is uncertain
– so take our view with a grain of salt

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

…But there is a strange similarity to 2021 surge versus 2020
While the delta variant is certainly the primary driver of a surge in USA cases, there seems to be a strange similarity to the surge in 2021 versus 2020. Tireless Ken and team put together some COVID-19 analysis, comparing 2021 to the same date in 2020:

– USA cases are turning up on cue
– USA hospitalizations similarly are tracking 2020 closely

– are the seasonal influences behind this?
– “air condition” season in the South
– “outdoor season” in the North?

– are vaccines mitigating hospitalizations?
– this seems to be the case
– but cases rising in a seasonal pattern

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

Even looking at these 5 states, we can see that cases seem to be seasonal
We looked at 5 states (4 big ones and Alabama with low vax). And the pattern sure seems seasonal/ consistent with 2020:

– daily cases are rising in FL/AL consistent with air conditioning season
– NY/CT seem to be following the 2020 pattern

– TX is the exception, as cases are modestly rising

So, perhaps there is a seasonal element to COVID-19? That is, while vaccinations matter, it seems like PCR/detected cases are still following a seasonal pattern.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

The good news is that in these 4 states, hospitalizations are far lower in 2020:

– more vulnerable are protected via vaccine
– presumably vaccines work
– perhaps the Delta variant might be less severe
– therapeutics are mitigating severity?

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

 

…States with higher vaccination rates are seeing better hospitalization trends in 2021 vs 2020
Tireless Ken and team looked at seasonal patterns, but made a composite vs 2020:

– Top 5 states are seeing relatively better trends in hospitalizations
– Bottom 5 states (lowest 5 vaxxed) are seeing a surge in hospitalizations

– Top 5 are VT, MA, ME, CT, RI
– Bottom 5 are LA, WY, AR, MS, AL

There might be some North vs South at work here. After all, it is “air conditioning” season in the bottom 5 states. So these 5 states might be simply reflecting seasonal risk of COVID-19.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

STRATEGY: Wave 2 cases peaked July 19, 2020 but equities bottomed 6/15, or 34 days before cases peaked
Given that there may be a “summer seasonal” to COVID-19, we think it is useful to look at how equity and financial markets patterned themselves to COVID-19 Wave 2. Below are some charts and discussion. But on a high level, here is the abstract:

– COVID-19 Wave 2 peaked on 7/19/2020
– Wave 2 started 6/17/2020

Date # Days
Bottom vs Wave 2

– Wave 2 7/19 N/A

– S&P 500 6/15 -34 days
– VIX 6/15 -34
– Epicenter 7/9 -10

– 10-yr 8/5 +17

…S&P 500 in 2021 will bottom likely 30-35 days before cases peak
So, interestingly, stocks and VIX “sniffed” out the 2020 Wave 2 bottom well ahead of cases. And it took Epicenter stocks another 2 weeks. This, is key and instructive.

In 2021, COVID-19 cases might surge to 100,000-plus but the S&P 500 will likely peak well ahead of this:

– Watch the VIX
– it made a “low energy” surge to 25
– if 25 is the best it can peak, the S&P 500 bottomed today

We think the tactical bottom in the S&P 500 will be within the next 9 trading days, or before the end of July chop. This is what we are watching.

Below is further discussion.

…S&P 500 bottomed on 6/15/2020, 34 days before COVID-19 cases peaked
Wave 2 started in June 17, 2020 (see below) and did not peak for another 32 days. This is highlighted below:

– S&P 500 had a 8% drawdown
– Sell-off started 6/8/2020, 9 days before cases surged

– S&P 500 decline bottomed 6/15/2020, 7 days later
– Stocks bottomed 34 days BEFORE cases peaked

The last point is key. We think equities will bottom BEFORE Delta variant cases peak.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

…VIX peaked on 6/15/2020, the DAY of S&P 500 BOTTOM
As we have said before, the VIX is key. As shown below, the VIX marked the S&P 500 bottom:

– VIX bottomed on 6/5/2020
– this is 12 days before cases surged
– this is 3 days before equities peaked

– VIX peaked on 6/15/2020 at 44
– VIX peaked same days equities bottomed

Watch the VIX. If today’s surge to 25 is the peak. The S&P 500 likely bottomed today.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

…Epicenter stocks did not bottom until 24 days after the VIX / S&P 500 bottom
As for Epicenter stocks, they did not bottom in 2020 until 24 days after the S&P 500 bottom. This all took place in July:

– Epicenter bottomed on 7/9/2020
– this is 24 days after S&P 500 bottom

– thus, tactically, Epicenter stocks bottom closer to the bottom of cases

In other words, Cyclicals are linked much more closely to case counts.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.


…Interest rates peaked 12 days before cases surged… bottomed 17 days after cases bottomed
In another case of bond markets being ahead of equities:

– interest rates peaked 6/5/2020, 12 days before cases surged
– cases turned up 6/17

– interest rates bottomed on 8/5/2020
– 17 days after cases peaked

So it looks like interest rates sniffed out the surge in cases well ahead of the equity market. But bonds did peak 3 days ahead of equities.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

POINT 1: Daily COVID-19 cases 57,633, up +22,926 (ex-FL&NE) vs 7D ago…
_____________________________

Current Trends — COVID-19 cases:
– Daily cases 57,633 vs 39,878 7D ago, up +17,755
– Daily cases ex-FL&NE 57,633 vs 34,707 7D ago, up +22,926
– 7D positivity rate 5.3% vs 4.2% 7D ago
– Hospitalized patients 23,040, up +30% vs 7D ago
– Daily deaths 249, down -5% 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 57,633, up +17,755 (ex-FL&NE). We normally see a spike in daily cases each Monday, given that over 2/3 of US states no longer report COVID stats over the weekend. And hence, daily cases on Monday reflect the total new cases over the past three days. That said, the cases are indeed surging across the US, evidenced by the chart below. Considering the delayed data of Florida, the total new cases on Monday would exceed 60,000. In fact, this is the highest level that we have seen since the “mini-wave” in mid-April.

The 7D delta has been flat over the past week, which shows that daily cases are not parabolically surging. However, the future is uncertain, so it could rise rapidly. As many states reported, the current wave is essentially a “pandemic of the unvaccinated.” Therefore, we believe in order to prevent a parabolic surge in case figures (and both hospitalizations and death toll, too), continued efforts to get more people vaccinated remain the key.

Currently, TN, OK, AR, SC, AL, MO, and MS are the states with the largest increase in daily cases compared to their recent lows (as shown in the “parabolic” tracker below), and all 7 states have less than 50% of their populations vaccinated with at least one dose. This is consistent with what we wrote before regarding the majority of new cases being amongst unvaccinated individuals, and with what we noted previously, vaccination penetration appears to have some causal relationship with the case trend. Therefore, the COVID developments (both the case and vaccination trends) in these states along with the other low vaccinated states (such as LA, GA, ID, WY, ND, IN) are worth watching.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

7D delta in daily cases has been about 10,000, flat-lined over the past few days…
The 7D delta in daily cases now rose to approximately 10,000, but it has flat-lined over the past few days. The good news is the speed of case increase is not parabolic. However, the future is uncertain, so that it could rise rapidly. We will be closely watching this metric.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

Low vaccinated states seem to have a larger increase in daily cases compared to their recent low…
Below, we added a new section called “Parabolic Case Surge Tracker” to monitor the possible parabolic surge in daily case figures. In the table, we included both the vaccine penetration and the recent case trend for 50 US states + DC. The table is sorted by the multiple of their current daily cases divided by their recent low in daily cases.

– The states with higher ranks are the states that have seen a more significant rise in daily cases
– We also calculated the number of days between now and the recent low date; a state with a high multiple but low number of days since its low means the state is facing a relatively rapid surge in daily cases
– The US as a whole, UK, and Israel are also shown at the top as a reference

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

Current hospitalization and positivity rates are rising… Daily deaths also seem to be turning upwards now…
Below we show the aggregate number of patients hospitalized due to COVID, daily mortality associated with COVID, and the daily positivity rate for COVID. As you can see, hospitalization and daily deaths are relatively low compared to the prior waves. However, with the recent increase in daily cases, current hospitalization is clearly turning upwards, while daily deaths also appear to be turning. Regarding positivity rate, it recently exceeded 5%, which is higher than the positivity rate we observed during the “mini” wave this April and significantly higher than the recent low of <2%.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.
Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

POINT 2: VACCINE: vaccination pace has been flat over the past week… The effort to get more people fully vaccinated remains the key…


_____________________________


Current Trends — Vaccinations:
– avg 0.5 million this past week vs 0.5 million last week
– overall, 48.3% fully vaccinated, 55.7% 1-dose+ received
_____________________________


Vaccination frontier update –> all states now near or above 80% combined penetration (vaccines + infections)
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
– RI, MA, SD, CT, NJ, IL, NY, DE, NM, UT, PA, ND, AZ, MN, CA, FL 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.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

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%. As you can see, all states have reached 60% and 70% combined vaccination + infection. 96.8% of US states (based on state population) have seen combined infection & vaccination >80% and 65.6% of US states have seen combined infection & vaccination >90%.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

There were a total of 502,787 doses administered reported on Monday. Over the past 7 days, 515,810 doses were administered per day on average, up 0.7% from 7D ago. Over the past 10 days, the vaccination speed has not been down (essentially flat). It could be that the increasing spread of delta variant and rising case figure caused more people to seek vaccination. However, compared to mid-April, the current vaccination rate remains low. Admittedly, nearly 2/3 of the US population eligible (age 12+) to receive COVID vaccines have already received at least one dose. For some people among the rest 1/3, the vaccine hesitancy concerns might not easily be reversed. More studies on the vaccine’s side-effects and its efficiency against the variant, as well as government efforts, could help. We will be closely watching the relevant data.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

97.7% of the US has seen 1-dose penetration >40%…
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 line on the chart. Currently, 85.8% 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 63.4%. And only 44.5% of US (by state population) have seen 50% of its residents fully vaccinated.

– While 97.7% of US states have seen vaccine penetration >40%, 89.1% of them have seen 1 dose penetration >45% and 66.2% of them have seen 1 dose penetration > 50%.
– 85.8% of the US has at least 40% of its residents fully vaccinated, However, only 63.4% of US has fully vaccinated >45% and 44.5% of US has fully vaccinated >50%.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

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

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

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 ~20 for the past few days
– this means 20 vaccines dosed for every 1 confirmed case

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

In total, 336 million vaccine doses have been administered across the country. Specifically, 185 million Americans (56% of US population) have received at least 1 dose of the vaccine. And 160 million Americans (48% of US population) are fully vaccinated.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

POINT 3: Tracking restrictions lifting and subsequent effects in individual states

Point #3 focuses primarily on tracking the lifting of restrictions, as states have eased the majority of mandates. Keep in mind, easing/lifting restrictions are contingent upon state of emergency ordinances being renewed.

– States in groups 1 and 2 represent states that let their emergency ordinances expire, or that never had one in the first place
– Note: IL and HI are not listed. This is because restrictions lifting is determined at the county / island level, and no statewide policy will be established to lift restrictions until a full reopening

So there is a spectrum of approaches. Our team is listing 3 tiers of states and these are shown below.

– states that eased all restrictions in 2020: AK, OK, MO, FL, TN
– states that have eased all restrictions in 2021 to now: ND, SD, NE, ID, IA, MT, MS, AZ, SC, WY, TX, GA, AR, KS, WI, IN, AL, UT, NH, LA, NJ, KY, MN, MA, VT, OH, WV, ME, MI, NY, OR, PA, MD, DE
– states that are still easing restrictions in 2021: WA, NC, CA, NM, CO, NV, CT, VA, RI, DC

GROUP 1: States that lifted restrictions in 2020…
The daily case trends in these states are impressive and it is difficult to say that lifting restrictions has actually caused a new wave of cases because the case trends in these states look like other states.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

GROUP 2: States that have lifted restrictions in 2021 to now…
Similar to the list of states above, the daily case trends in these states are impressive and it seems that lifting restrictions hasn’t caused an increase in cases.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

GROUP 3: States that are still easing restrictions in 2021…
These states have begun to lift restrictions, but have yet to ease all restrictions. The date of each state’s most recent restrictions lifting is indicated on each chart. The case trends in these states have been mostly positive.

– Easing restrictions appears to have contributed to an increase in cases in several of these states, most drastically in OR, ME, WA, and MN

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

Is COVID-19 seasonal? July chop underway, don't be a hero. In 2020, stocks bottomed 34 days before cases peaked.

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