Click HERE to access the FSInsight COVID-19 Daily Chartbook.
We are shifting to a 4-day a week publication schedule:
- Monday
- Tuesday –> NO REPORT
- Wednesday
- SKIP THURSDAY
- Friday
ALERT: Just want to give you a heads up. My birthday is Monday and I plan to celebrate by going to dinner with some friends. Thus, there is no report planned for Tuesday.
STRATEGY: Positive risk/reward for stocks becoming increasingly positive. Latest example is soaring equity put/call ratio
…US COVID-19 cases collapse to 12,825 Sunday, the lowest figure since March 24, 2020… the START of the pandemic
US daily cases fell to 12,825 on Sunday. That figure is so shockingly low, it is the lowest since March 24, 2020. Yes, this is the lowest figure since the pandemic started:
– this is an absolutely incredible feat.
– COVID-19 cases are retreating so rapidly, it could fall to sub-10,000 within next 10 days
– this affirms the US is on track to fully re-open by June 2021, or within next few weeks
…Long haul COVID-19 might be a disease postural orthostatic tachycardia syndrome, or POTS
This article caught my attention on Sunday. A group of cardiologists at UCSD (University of California San Diego) diagnosed more “long haul” COVID-19 patients as suffering from blood circulation disorder called postural orthostatic tachycardia syndrome, or POTS.
I know a number of my friends and acquaintances who have told me of someone who has lingering symptoms post-COVID. The common symptoms are racing heart, fatigue, brain fog among others and apparently, this is affecting as many as 10% of COVID-19 recovered persons. Many of these might be POTS:
– POTS is often triggered by viral infections (ala COVID)
– POTS is a dysautonomia, or disfunction of the nervous system
– POTS overlaps with chronic fatigue syndrome
– POTS is treated with several drugs
– ivabradine (Amgen) and helps with racing heartbeats
– beta blockers also help in several studies (see article)
– avoiding carbohydrates seems to help
This was one of the more comprehensive articles discussing both “long haul COVID” symptoms, diagnosis and treatments.
https://www.npr.org/sections/health-shots/2021/05/22/996533041/after-months-of-a-racing-heart-and-burning-feet-a-covid-long-hauler-gets-a-diagn
…NIH estimates that as many as 3 million Americans suffer from “COVID Long Haul”
There may be a shocking number of Americans suffering from long haul COVID. According to the NIH’s Francis Collins, an estimate 10% of Americans recovered have long haul symptoms:
– 32 million Americans have recovered from COVID-19
– est. 3 million are “long haul” COVID
That is a shockingly large number of American who will have lingering symptoms. Several past articles have suggested getting vaccinated has helped, presumably due to the vaccine aiding in eradicating the remaining viral load in the body. But as a society, the US has to consider the long lasting impact of 3 million Americans potentially suffering from long-term symptoms
Source: https://www.webmd.com/lung/news/20210429/cdc-to-issue-guidelines-as-long-haul-covid-numbers-rise
…9.8 million Americans are currently receiving Disability Insurance, will long haul add another 3 million?
The Social Security Administration publishes its annual Disability Insurance (DI) program statements. The latest was published October 2020 for 2019. And the summary of the beneficiaries is below:
– 9.8 million Americans are receiving DI benefits
– only 337,654 or these, or 3.5% have workplace injury
– 2.9 million have a musculoskeletal issue
– 1.2 million have “mood disorders”
Could COVID-19 “long haul” become the largest category of DI recipients?
I don’t have the answer, but this raises the urgency of the US and the world finding a way to treat “long haul” symptoms. And if this is a form of POTS, this will create an opportunity for drug makers to address another large cohort of a chronic disease.
STRATEGY: our equities view remains constructive and incremental data support next major move S&P 500 4,400 by mid-year
Stocks have been rangebound for the past month, and this range movement has been “chewing up” our clients. This is evident by our multiple conversations. That said, we continue to see incremental data points that strengthen our view that when equities break out of this range, the next move is a substantial rise higher:
– while equities suffered from wild swings last week, bond markets hardly moved on FOMC nor on Bitcoin plunge –> bullish divergence
– CBOE put/call ratio is the highest since early March and 3 of 3 highest readings were “tradable S&P 500 lows” –> contrarian bullish
– latest CFTC speculative positioning data shows small-cap positions “short” positioning >1.5 std above normal –> contrarian bullish
Add this to our existing data points:
– US LEIs accelerating –> S&P 500 historically shows unusual upside in next 6M
– Institutional cash on sidelines “dry powder” rose again to near record $3.1T –> contrarian bullish
– VIX could only manage a “low energy” attempt to surge higher and is now potentially showing H&S pattern break to downside
…Bond markets not moving on FOMChawkishnessnor on Bitcoin drop
We believe bond markets lead equity markets. Hence, if bond and equity markets diverge, we tend to think this will resolve with stocks converging on bonds. Well, last week, despite the multiple equity market palpitations on inflation and crypto crash, the bond market hardly flinched:
– per JPMorgan Fixed Income team, the bond markets “were not especially moved”
– and their short term view is positive on credit as well
Source: JPMorgan US Fixed Income Research
…CBOE put/call ratio surging to levels that have signaled up moves in equities
Additionally, take a look at the latest CBOE equity put/call ratios. This current level of 1.7 the highest since early March:
– we marked the end of the 4 most recent S&P 500 drawdowns below (see red circles)
– each one saw an elevated put/call ratio
Elevated put/call ratios reflect a market that is seeking protection (“put” buying) or anticipating market decline (positioned short). Either way, at the extremes, this is a contrarian buy signal. And we think this most recent surge is similarly a buy signal.
Source: https://twitter.com/hmeisler/status/1396096127309656064/photo/1
…CFTC data shows investors with large short bets on Russell 2000 = contrarian buy signal
And to further highlight how crowded the “short side” is becoming, the latest CFTC data shows net speculative position for Russell 2000 (small-caps) is unusually bearish. This data and chart are created by UBS Equity Strategy team. The net short position “-15%” is 1.5 standard deviations above long-term trends.
– in other words, institutions are unusually bearish on small-caps
– read this as another “contrarian buy signal”
After all, if investors are already bearishly positioned via puts/call ratio and CFTC futures positioning and by the $3.1T of cash on the sidelines. What will the next market move be?
– keep in mind, credit and rates markets are giving “risk on” signals
– bonds lead stocks
– next move likely is a sharp upwards move in equities
…Institutional investors added +$33 billion to cash on sidelines in past week, taking YTD totals to $330 billion!!!
The amount of institutional cash on sidelines aka “dry powder” keeps growing at a staggering rate. Take a look at the chart below. Institutional investors added another $33 billion in cash to the sidelines (ICI money market funds) in the past week.
– total cash added to sidelines YTD $330 billion
– ending cash balances $3.098T, nearly matching May 2020 levels
Again, given this is contrarian bullish considering the following circumstances:
– US LEI (leading economic indicators) accelerating –> unusual S&P 500 upside
– CTFC data shows unusually large short interest on small caps (Russell 2000) –> contrarian bullish
– US fixed income markets unfazed by turmoil last week –> bullish divergence –> stocks rise
All in all, this bolsters our view that equities will likely rally to S&P 500 4,400 by mid-year.
ENERGY STILL FAVORITE SECTOR: Institutional investors adding Energy, but it remains most “underweight” by Hedge funds and Mutual funds
This CNBC story below caught our eye. In the latest 13F, David Tepper’s Appaloosa Management added Energy while trimming Technology holdings. David Tepper is well regarded and his moves, because they are widely followed, often catch a lot of attention:
– Tepper is buying Energy stocks
– Energy remains one of the most “underowned” sectors today
– Energy remains our top sector pick in 2021
Source: https://www.cnbc.com/2021/05/18/teppers-appaloosa-trimmed-tech-bought-energy-stocks-in-first-quarter.html
…UBS data shows Energy is the most “underowned” by hedge funds and by mutual funds
UBS has a great chart in their latest deck. This looks at the comparative weighting of hedge funds and mutual funds versus the S&P 500 overall. This is a bit of a messy chart to look at, but the data is useful:
– Underweights by both HF and MF is the bottom left corner
– Energy is the most “underweight” by both HF and MF
– Consumer Staples as well
We highlighted Staples earlier this month, as we upgraded that sector from UW to Neutral, as we saw Staples as one of the beneficiaries of a rotation out of Technology. But the bigger takeaway, in our view, is that Energy remains a consensus underweight.
– Energy is the best performing sector YTD with gains ~40%
– Energy is the most “underowned” by both HF and MF
– Tepper is buying Energy stocks recently
Where does this lead us on Energy? This is merely my opinion, but this is extremely and a potentially massive bullish scenario. As our prior comments have noted, we believe Energy could rise 80%-100% in 2021 and these latest data points argue this remains the more logical central case.
– The best proxies for this are XLE 0.93% OIH 1.50% XOP 1.33%
STRATEGY: …avoiding trouble spots is almost as important as finding good idea —> Technology
I find it also head scratching when people tell us we only have a “positive” view on equity markets. That is hardly the case. In 2021, we have been articulating cautionary on the one area of the market that has fallen into trouble in 2021.
– FANG/hyper growth stocks have fallen 18% since February
The weakness in Technology is more than temporary, as we have warned our clients about since the start of the year. With the US economy on track to reopen fully within the next few weeks, we see pent-up demand for many “real word” services, and thus, on the margin, diminishing demand and investor enthusiasm for all things digital.
– we believe Technology made its low for 2021 on 3/5/2021 (see INTRADAY WORD on 3/5/2021)
– we just think Technology underperforms Epicenter and S&P 500 broadly into YE
Tangentially, a month ago, we hosted a webinar with Tom DeMark, and our takeaway for Bitcoin was that the price was in “no man’s land” between $47,000 and $62,000. And once Bitcoin fell below $47,000, we also warned about “Bitcoin rule #3” which is the 200D moving average ($40,000). Once bitcoin falls below its 200D, it becomes a “Missouri market” –> a show me. And needs to recover >200D to resume the uptrend.
– that said, we believe >50% odds Bitcoin bottomed last week
– but like Technology, needs to consolidate for awhile
– I still believe Bitcoin is in a bull market, and post-consolidation, will exceed $125,000 this year
ADDENDUM: We are attaching the stock lists for our 3 portfolios:
We get several requests to give the updated list for our stock portfolios. We are including the links here:
– Granny Shots –> core stocks, based on 6 thematic/tactical portfolios
– Trifecta epicenter –> based on the convergence of Quant (tireless Ken), Rauscher (Global strategy), Technicals
– Violence in USA –> companies that are involved in some aspect of home or personal security. We are not “recommending” these stocks, but rather, bringing these stocks to your attention.
Granny Shots:
Full stock list here –> Click here
Trifecta Epicenter (*):
Full stock list here –> Click here
Power Epicenter Trifecta 35 (*):
Full stock list here –> Click here
Violence in USA:
Full stock list here –> Click here
(*) Please note that the stocks rated OW on this list meet the requirements of our investment theme as of the publication date. We do not monitor this list day by day. A stock taken off this list means it no longer meets our investment criteria, but not necessarily that it is neutral rated or should be sold. Please consult your financial advisor to discuss your risk tolerance and other factors that characterize your unique investment profile.
POINT 1: Daily COVID-19 cases 12,825, -4,491 vs 7D ago… Daily cases set to drop to sub-10,000 next week…
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Current Trends — COVID-19 cases:
– Daily cases 12,825 vs 17,316 7D ago, down -4,491
– 7D positivity rate 2.7% vs 3.1% 7D ago
– Hospitalized patients 24,265 down -12.1% vs 7D ago
– Daily deaths 551, down 2.3% vs 7D ago
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– The latest COVID-19 daily cases came in at 12,825, down -4,491 vs 7D ago. The US continues to see a persistent decline in daily cases. The chart below shows that the declines seen in the US over the past 5 weeks are like a step-down function. With increasing vaccine penetration, we believe this steady decline in the daily case figure will persist. In fact, the 7D delta has been negative over the past 6 weeks and if this speed of decline persists, we could see the daily cases drop to sub-10,000 next week.
7D delta in daily cases has turned negative in the past 6 weeks…
The US continues to see a steady decline in daily cases. The 7D delta has been negative over the past 6 weeks. Over the past week, the 7D delta has been stable at negative 5,000 – 11,000 per day. If this speed of decline persists, we could see the daily case figure drop to sub-10,000 next week.
Current hospitalization, daily deaths and positivity rate all approaching all time low since the pandemic…
Below we show the aggregate patients who are currently hospitalized due to COVID. After a mini-surge in March, the number of patients currently hospitalized rolled over again. Positivity rate is also following the similar pattern. Currently, all three metrics – current hospitalization, daily deaths, positivity rate – are approaching all time low since the pandemic.
POINT 2: VACCINE: all states reached ~70% infected + vaccinated…Nearly half of Americans have received at least one vaccine dose…
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Current Trends — Vaccinations:
– avg 1.7 million this past week vs 2.0 million last week
– overall, 38.9% fully vaccinated, 48.8% 1-dose+ received
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Vaccination frontier update –> all states now near or above 70% combined penetration (vaccines + infections)
Below we sorted the states by the combined penetration (vaccinations + infections). As we commented in the past, the key figure is the combined value >60%, which is presumably near herd immunity. Several times, we have overlaid our case progress with that of Israel to demonstrate what should happen to cases once immunity reaches a certain critical level in the population. That is, the combined value of infections + vaccinations as % population > 60%. The persistent and rapid decline in cases suggest that the US is following a similar path to Israel (see our prior notes) while nations with less penetration continue to struggle more.
– Currently, all states are near or above 70% combined penetration
– RI, SD, MA, ND, CT, NJ, DE, NY, IL, UT, MN, NM, NE, AZ, PA are now above 90% combined penetration (vaccines + infections)
– So gradually, the US is getting to that threshold of presumable herd immunity. So long as a vaccine resistant variant doesn’t spread widely, the continued retreat of cases should continue.
Below is a diffusion chart that shows the % of US states (based on state population) that reach the combined penetration >60%/70%/80%/90%. As you can see, all states have reached 60% and 70% combined vaccination + infection. 72.8% of US states (based on state population) have seen combined infection & vaccination >80% and 47.6% of US states have seen combined infection & vaccination >90%. As the chart below highlights, the US is seeing steady forward progress and this figure continues to rise steadily.
There were a total of 1,760,694 doses administered on Sunday, down 35% compared to 7D ago. After a mild rebound following the re-approval of the J&J vaccine the pace of vaccinations has entered a downtrend. Looking forward, the recent CDC’s removal of restrictions for the fully vaccinated could encourage more to seek their shot. We believe it is therefore possible that we see a renewed surge in vaccinations. Though, as we said, in some states levels of immunity are quite high when added to those previously infected.
87.2% 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 35%/40%/45% of its residents fully vaccinated, displayed as the orange line on the chart. Currently, 69.3% of US states have seen 35% of their residents fully vaccinated. However, when looking at the percentage of the US with at least 40% of its residents fully vaccinated, this figure is 48.4%. And only 9.6% of US (by state population) have seen 45% of its residents fully vaccinated.
– While 87.2% of US states have seen vaccine penetration >40%, 64.3% of them have seen 1 dose penetration >45% and 45.6% of them have seen 1 dose penetration > 50%.
– 69.3% of the US has at least 35% of its residents fully vaccinated, However, only 48.4% of US has fully vaccinated >40% and 9.6% of US has fully vaccinated >45%.
– This is still a small figure but this figure is rising sharply now.
This is the state by state data below, showing information for states with one dose and for those with two doses.
The ratio of vaccinations/ daily confirmed cases is generally trending higher (red line is 7D moving avg) and this is the most encouraging statistic. Due to the recent collapse of daily cases, the ratio surged to 86x at one point.
– the 7D moving average is about ~60 for the past few days
– this means 60 vaccines dosed for every 1 confirmed case
In total, about half of Americans have received at least 1 dose of a vaccine. This is a good pace and as we noted previously, implies 70% of the population by Independence Day.
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
– states that are still easing restrictions in 2021: OR, ME, WV, WA, MN, MA, NC, KY, LA, CA, DE, PA, NM, OH, CO, NJ, VT, MD, NV, NY, CT, VA, MI, 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.
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.
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
