First Word

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

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

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

Labor Day – No First Word
Tuesday
Wednesday
SKIP THURSDAY
Friday

STRATEGY: Consensus not that constructive, even among typical Americans

COVID-19 will come to an end, but the path there is still unclear
Stocks started this shortened week on a weak note, with 3 of the major indices falling:

– Dow -0.76%
– S&P 500 -0.34%
– Nasdaq 100 +0.14%
– Russell 2000 -0.69%

Several Wall Street firms also downgraded their view on equities, citing risk factors such as slowing growth, inflation, Fed, etc, etc. Markets climb a wall of worry and this litany of risks is a good wall to work with. Our base case remains that stocks are set to rise throughout this month. We realize this is counter to seasonals and counter to 2020, but our rationale remains grounded on both a fundamental and a positioning view:

– Delta wave has peaked in the Southeast = template for rest of the USA = good
– Delta risk is keeping Fed dovish = good
– Investors are “fool me once…” = cautious = upside fuel

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
Source: https://www.cnbc.com/2021/09/07/morgan-stanley-downgrades-us-stocks-we-see-a-bumpy-september-october.html

…Consensus is just not that constructive, even consensus among typical Americans
I had lunch today (outdoors) with a few friends and these folks are not in the investment business. Like most lunches, conversations, and gatherings, COVID-19 is a central topic. But I was struck by a few comments my friends made:

– They view COVID-19 as a “long term issue” because mutations mean COVID-19 will be constantly evolving
– They believe the US is about to enter hyper-inflation because so many things they buy have gone up in price
– They think stocks are way over-valued

Does this sound familiar? These are not views expressed by professional investors, nor media types, but these are views from a typical educated American. You may or may not agree with their views. However, this is what stands out to me:

– the caution about US economy and stocks is consensus
– history strongly argues the actual outcome will differ from consensus

– either better (“everything rally”) or worse (“comeuppance”)

Our central case remains that COVID-19 trends are better than expected (see past notes) and that cautious investor positioning (“dry powder”) means the realized outcome is likely better than consensus.

But the future is uncertain.

…Two entities in China are working on mRNA vaccines = more shots at goal
Two entities in China are working on a mRNA COVID-19 vaccine. China’s vaccine to date have used the adenovirus and the shift to mRNA is a practical shift. The most effective vaccines in the US have been the mRNA vaccines by Pfizer and Moderna.

– Sinopharm, state-owned entity, is one of the two
– Suzhou Abogen Biosciences is also trialing Walvax (in Mexico and Indonesia)

The real question is whether COVID-19 can outpace and evade the healthcare and technology developments. And with more companies focusing on healthcare and technology solutions, we fall into the camp believing humans will prevail.

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
Source: https://www.ft.com/content/91cbc7ef-808d-448a-a832-2384f045dc35

…USA COVID-19 data will be messy for the next few weeks
COVID-19 data collection in the US is impacted by weekends and long weekends. And Labor Day 2021 is no exception. Thus, the incoming data this week will be messy. For instance, take a look at reported COVID-19 cases today:

– our team calculates 271,551 new cases for Tuesday
– this is not a sudden burst of new cases
– rather, it is a lag of reporting from closures over the weekend

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

…7D delta is negative, which is a better measure but still distorted
The 7D delta in cases is negative still. But as you can see below, this is distorted because closures over the weekend made 7D look better than trend over the weekend. For now, we simply need to wait for the data to become cleaner.

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

Fortunately, positivity rate is falling and this is a good sign. After all, staying below 10% means that US is surveilling COVID-19 accurately. And we know testing is increasing as part of the back to school protocols. Thus, this is a more contemporaneous measure that we can watch. And below 10% remains good.

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

STRATEGY: Financial markets are hinting at Epicenter leadership…
In many of our recent conversations, clients have revealed their preference to remains defensively positioned, preferring to own Growth/FANG given the uncertainty around the forward path of COVID-19 and risks to the global economy. This, of course, is purely anecdotal.

However, looking across markets, we see signs that markets might be signaling stronger growth ahead. The three that stand out to us are:

– 10-year has crept back to 1.37%, a two-month high
– Oil has rebounded > 15% from its recent fall to $62 and holding
– China equities have risen 15% in just the past few weeks

In all, these are pro-cyclical moves. That is:

– interest rates should not be creeping up if global growth is slowing
– oil should not be holding near $70 if global growth is slowing
– China stocks should not be rising if global growth is slowing

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

But the leadership of sectors is path dependent on the direction of equity markets. Our base case is that we see a rally in the S&P 500 for the next few weeks (at least). And as such, we see a risk-on rally led by Epicenter stocks. Our top 3 favorite sectors into YE are:

– Energy  XLE 1.08%   OIH 0.32%  –> catch-up to oil
– FAANG  FNGS -0.16%  –> catch-up trade to S&P 500 +25%
– Basic Materials  XLB 0.27%  –> reflation beneficiaries

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

__________________________

26 Granny Shot Ideas:
26 Granny Shot Ideas: We performed our quarterly rebalance on 07/30. Full stock list here –> Click here
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POINT 1: Daily COVID-19 cases 271,551, up +132,695 vs 7D ago…
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Current Trends — COVID-19 cases:
– Daily cases 271,551 vs 138,856 7D ago, up +132,695
– Daily cases ex-FL&NE 260,942 vs 119,530 7D ago, up +141,412
– 7D positivity rate 6.1% vs 8.6% 7D ago
– Hospitalized patients 95,471, down -1.5% vs 7D ago
– Daily deaths 1,764, up +39.6% 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 271,551, up +132,695. Many states did not report COVID data on Monday due to the observance of Labor Day. As such, the 7D delta remains quite distorted. This distortion should clear over the next week few days.

In good news, the average 7D delta across Monday and Tuesday is negative suggesting that both days would’ve posted negative 7D deltas. We previously mentioned that the 7D delta appears to be fighting towards the downside, and this data suggests that this fight is proving successful. A negative 7D delta indicates a case rollover, so hopefully the trend continues.

Currently, we are at the critical stage of case rollovers for many states. While some states have upheld their case rollovers, others proved to have been falsely rolling over. The view on case trends is still in favor of a case rollover, but, as mentioned above, we will be monitoring all relevant data closely. If the 7D delta continues to fall, the case rollover is just a matter of time.

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

…7D delta is negative, which is a better measure but still distorted
As shown in the chart below, the 7D delta in daily cases has been on a downtrend – down 60% from the peak of ~26,000 three weeks ago to a current level of ~-6,000. As per the negative average 7D delta across Monday and Tuesday, we expect the decline to persist. If the current trend remains steady and the 7D remains negative, the rolling 7D delta will soon become negative as well which would further emphasize a case rollover.

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

Low vaccinated states seem to have a larger increase in daily cases compared to their recent low…
The “Parabolic Case Surge Tracker” monitors 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 recent peak daily cases divided by the daily cases when their case surges started.

– 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 during the recent case surge; 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

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

Hospitalization continues rising, while positivity rate has plateaued… Daily deaths also start to surge 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.

– Hospitalization has exceeded the peak level we’ve seen in Wave 1 and 2 in 2020 and continues surging.
– With the increasing number of daily tests, positivity rate has plateaued over the past week. As daily cases have already started to roll over in some states, the positivity rate could roll over soon.
– Daily deaths have been surging recently, but less “dramatic” than the cases or hospitalization trends. Currently, daily death has surpassed the peak we have seen in Wave 2.

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

POINT 2: VACCINE: vaccination pace has been steadily rising…
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Current Trends — Vaccinations:
– avg 0.8 million this past week vs 0.9 million last week
– overall, 52.8% fully vaccinated, 62.0% 1-dose+ received
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Vaccination frontier update –> all states now near or above 90% 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 90% combined penetration
– RI, MA, FL, CT, SD, NJ, IL, NY, DE, NM, UT, PA, ND, NV, CO, KS, TN, OK, WI, SC, AZ, MN, CA, and NE 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.

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

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 90% combined vaccination + infection. 73.1% of US states (based on state population) have seen 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).

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

There were a total of 497,626 doses administered reported on Monday, down 23% vs. 7D ago. The holiday weekend’s low vaccination rates are likely due to the observance of Labor Day. As such, the overall vaccination trend has been steadily increasing recently. We believe many catalysts could push the vaccination pace even higher.

– 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)

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

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

53.1% 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, 96.4% 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 85.8%. And only 59.4% 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 97.6% of US states have seen 1 dose penetration > 50%, 78.1% of them have seen 1 dose penetration > 55% and 53.1% of them have seen 1 dose penetration > 60%.

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

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

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

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 ~4 for the past few days
– this means 6 vaccines dosed for every 1 confirmed case

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

In total, 376 million vaccine doses have been administered across the country. Specifically, 206 million Americans (63% of US population) have received at least 1 dose of the vaccine. And 175 million Americans (53% of US population) are fully vaccinated.

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

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.

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

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.

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

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.

USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans
USA COVID-19 data will be messy for the next few weeks. Consensus not that constructive, even among typical Americans

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