COVID-19 UPDATE: COVID-19 case reverse progress as 7D delta now positive = questionable. Technology and Healthcare are slowing leaking

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: Technology and Healthcare are slowing leaking
The improvement in daily cases halted, as daily cases 7D delta turned positive — is this a reversal? or is this Texas?
The 7D delta turned positive after being negative for the past 42 days consecutively. However, as we wrote previously, Texas case number was artificially low last week due to the lab closures caused by the cold snap. And the rise of daily cases could just be a “true-up”.
– The 7D delta in daily cases for US is +3,376, while Texas, itself, is +4,248. Hence, without the distortion in Texas, 7D delta in daily cases for US would remain negative.

  

Source: COVID-19 Tracking Project

STRATEGY: Epicenter has been solid… but Tech/Healthcare continue to leak…
At the open/early trading, we saw a mini-“flash crash” with S&P 500 and Nasdaq 100 quickly down greater than 2%. Contributing factors for the sell-off included multiple triggers: 


– building nervousness around the rising rates and the Fed testimony, 
– steady deterioration in Nasdaq/Growth stocks and the “gut punch” from drop in Churchill SPAC (CCIV)
– overnight fall in Bitcoin (yup)


But fortunately, both equities and VIX found some footing through the trading day.  In fact, this wobble in equities was quite telling:

– As shown below, Epicenter sectors actually rose on Tuesday
– But Tech and Healthcare were weak

The observation we have is that on days of market weakness, it is led by Technology and Healthcare to the downside.  But Epicenter sectors are rising.  This is the divergence.

– Epicenter sectors have added 23 points in the past week, or rose from 2% to 6%
– But Technology and Healthcare have been steadily bleeding

STRATEGY:  7 reasons stocks are “buy the dip” even as the bond market is on “edge” with Fed Chair Powell set to speak…
The larger story arc, in our view, is that equities have multiple positive supports and this constructive backdrop likely prevents a larger risk-off spillover.  In fact, this past week is evidence of this.  Despite the surge in the VIX and the rollover of technology stocks, the indices actually were flat and Epicenter stocks were positive.

More specifically, we see 7 positive supports for stocks in the near-term:

1. Washington is moving forward with passing a large fiscal relief package, and Treasury Sec. Yellen has made a forceful case for it

2. Fed has been vocal in policy stance (last week’s minutes affirmed) and Fed is patient

3. US economy is re-opening and economic momentum is strong — so strong, JPMorgan’s Chief Economist, Bruce Kasman, says US V-shape recovery will soon surpass China.  Wow.

4.  There remains a substantial perception gap between policymakers/media and COVID-19 realized data, and a closing of this gap is positive for risk assets.

5.  Millennials are steadily allocating assets toward equities, and the surge in retail brokerage account openings is evidence of this.

6.  Bonds are becoming less attractive total return vehicles as inflationary expectation are increasing, boosting the attractiveness of equities

7.  VIX is steadily declining, and as we pointed out in our 2021 Outlook, periods of declining volatility historically lead to big equity gains, particularly for cyclicals.

STRATEGY: Epicenter Trifecta List 121 stocks(*)
The case for being Cyclically-tilted is strengthening:
– Vaccine rollout set to accelerate
– US cases collapsing
– US economy set to re-open
– US corporates reset cost structures = strong operating leverage
– US credit markets strong = cost of capital falling


Below is our updated “Trifecta” epicenter stock list. These are the stocks which were hit the hardest by the pandemic and have the greatest operating leverage to a re-opening.  And we like the earnings upside in these stocks, because of the massive cost reset.  The stocks are based on positive views coming from the trifecta of: (i) Quant (tireless Ken), (ii) Global Portfolio Strategy (Brian Rauscher, aka Rocky) and (iii) Technicals.  

Consumer Discretionary:
AN, GM, F, GRMN, LEG, TPX, TOL, NWL, MAT, PII, RL, MGM, HLT, MAR, NCLH, RCL, WH, TNL, SIX, DRI, SBUX, FL, GPS, KSS, LB, VFC

Financials:
FITB, WTFC, ASB, BOH, FHN, FNB, PB, PBCT, RF, STL, TFC, WBS, PNFP, PACW, SBNY, NYCB, MTG, EVR, GS, IBKR, VIRT, BK, STT, SYF, BHF

Industrials:
AGCO, OC, ACM, WAB, EMR, GNRC, NVT, CSL, GE, IEX, PNR, CFX, DOV, MIDD, SNA, XYL, FLS, EAF, TTC, ITT, ALK, DAL, JBLU, LUV, MIC, KEX, UNP, JBHT, R, UBER, UHAL, LSTR, MAN

Energy:
XOM, HP, BKR, HAL, NOV, SLB, COP, EOG, FANG, HES, MRO, MUR, PXD, XEC, HFC, MPC, PSX

Basic Materials:
LYB, EXP, MLM, CF, MOS, ESI, NEU, NUE, RS, SON, IP

Real Estate:
BXP, HIW, UDR, KIM, NNN, WRI, VNO, JBGS, RYN

Source: Fundstrat, Bloomberg

(*) 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.

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
Tickers: AAPL, CSCO, INTC, MXIM, NVDA, EBAY, KLAC, GRMN, GOOG, MNST, MSFT, AMZN, QCOM, TSLA, PYPL, AXP, BF/B, PM, XLNX, TGT, PG, XOM, VLO, GL, RF, ATVI, BBY, GE, AMAT, LRCX, MU, HPQ

Trifecta Epicenter (*):
Full stock list here –> Click here
Tickers: AN, GM, F, GRMN, LEG, TPX, TOL, NWL, MAT, PII, RL, MGM, HLT, MAR, NCLH, RCL, WH, TNL, SIX, DRI, SBUX, FL, GPS, KSS, LB, VFC, FITB, WTFC, ASB, BOH, FHN, FNB, PB, PBCT, RF, STL, TFC, WBS, PNFP, PACW, SBNY, NYCB, MTG, EVR, GS, IBKR, VIRT, BK, STT, SYF, BHF, AGCO, OC, ACM, WAB, EMR, GNRC, NVT, CSL, GE, IEX, PNR, CFX, DOV, MIDD, SNA, XYL, FLS, EAF, TTC, ITT, ALK, DAL, JBLU, LUV, MIC, KEX, UNP, JBHT, R, UBER, UHAL, LSTR, MAN, XOM, HP, BKR, HAL, NOV, SLB, COP, EOG, FANG, HES, MRO, MUR, PXD, XEC, HFC, MPC, PSX, LYB, EXP, MLM, CF, MOS, ESI, NEU, NUE, RS, SON, IP, BXP, HIW, UDR, KIM, NNN, WRI, VNO, JBGS, RYN

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 59,486, +3,376 vs 7D ago…

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Current Trends — COVID-19 cases: 
– Daily cases    59,486 vs 56,110 7D ago, up +3,376
– 7D positivity rate   5.7% vs 6.3% 7D ago
– Hospitalized patients   55,058, down -15% vs 7D ago
– Daily deaths    2,016, down -8% vs 7D ago
_____________________________



The latest COVID-19 daily cases came in at 59,486, instead of declining, it is up 3,376 vs 7D ago.  
The 7D delta in daily cases has turned positive Tuesday, after being negative for 42 days. However, this is primarily due to the data distortion in TX.

Source: COVID-19 Tracking Project  and Fundstrat


7D delta in daily cases turns positive due to the data distortion in Texas…
The 7D delta turned positive after being negative for the past 42 days consecutively. However, as we wrote previously, Texas case number was artificially low last week due to the lab closures caused by the cold snap. And the rise of daily cases is just a “true-up”.
– The 7D delta in daily cases for US is +3,376, while Texas, itself, is +4,248. Hence, without the distortion in Texas, 7D delta in daily cases for US would remain negative.

  

Source: COVID-19 Tracking and Fundstrat  




US hospitalization still rolling over … and even US deaths seem to be rolling over…
Below we show the aggregate patients who are currently hospitalized due to COVID. It certainly seems to be rolling over = good sign.

Source: COVID Tracking Project and Fundstrat

Source: COVID Tracking Project and Fundstrat

Source: COVID-19 Tracking and Fundstrat 

Source: COVID-19 Tracking and Fundstrat  

 




POINT 2: VACCINE: Pace vaccinations kind of stalling… 1.8mm vs 1.6mm (7D avgs)

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Current Trends — Vaccinations: 
Vaccinations ramping steadily
– avg 1.8 million this past week vs 1.6 million last week
– overall, 6.0% have 2-doses, 13.4% 1-dose
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Vaccination frontier update –> only ND + SD + RI > 60% 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.  That is, the combined value of infections + vaccinations as % population > 60%.

– Currently, only ND + SD + RI are at this level
– nearly half of the states are approaching this, such as UT, AZ, TN, OK at >55%
– So slowly, the US is getting to that threshold of presumable herd immunity

Source: CDC, COVID Tracking Project and Fundstrat



There was a total of 853,143 doses administered. The stats 7D ago was distorted due to President’s Day. Hence the data is not really comparable. However, the pace overall is steadily rising, as evidenced by the 7D moving average (see blue line).

Source: CDC, COVID-19 Tracking Project and Fundstrat 


~10% of the US has seen 1-dose penetration >15%… still not wide geography
To better illustrate the actual footprint of the US vaccination effort, we have a time series showing the percent of the US with 2-doses covering at least 5% of its residents, displayed as the orange line on the chart.  This figure is 92% (orange line).   That means, while 6% of the US overall has received 2 doses, 92% of US states has US citizens with >5%. 


– While all US states have seen vaccine penetration >10%, only 10% of them have seen 1 dose penetration >15%. Not a lot of geography.
– Now 92% of the US has at least 5% of its residents with the full 2 doses
– This is still a small figure (5% of residents with 2 doses) but this figure is rising sharply now
– the takeaway is the vaccination efforts are unlikely to be having much of an effect on case figures, currently

Source: CDC, COVID-19 Tracking Project and Fundstrat 



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

Source: CDC, COVID-19 Tracking Project and Fundstrat 





The ratio of vaccinations/ daily confirmed cases is generally trending higher (red line is 7D moving avg) and this is the most encouraging statistic. 

– the 7D moving average is about ~25 for the past few days
– this means 25 vaccines dosed for every 1 confirmed case

This figure is rising nicely and likely surges in the coming weeks

Source: CDC, COVID-19 Tracking Project and Fundstrat


In total, about 44 million Americans have received at least 1 dose of a vaccine.  This is a good pace and as we noted previously, implies 30% of the population by April.  

Source: CDC and Fundstrat



POINT 3: >70% of COVID-19 infected suffer the loss of smell
I am stating something obvious.  The sense of smell is one of our key senses and central to many aspects of our lives:

– enjoyment –> food, places, perfume, etc
– safety –> burning, smell dangers
– social –> smell is way more important to our engagement with others socially 

In fact, people may not realize this, but nearly every person smells their hand after meeting someone.

Yup, that is human instinct.  In fact, this NOVA article below discusses this.
– it looks like it stems from our chemosignaling to acquire information about a person.
– similar to how animals sniff each other, but far more polite

Source: https://www.pbs.org/wgbh/nova/article/you-probably-sniff-your-hand-after-shaking-someone-elses/


COVID-19 is disrupting “handshakes” and also sense of smell…
So COVID-19 is creating two avenues of disruption related to our use sense of smell:

– >70% of COVID-19 sufferers lose the sense of smell
– surprisingly large number lose it long term
– not “shaking hands” deprives humans of key chemical signaling

This is why there will be a need to develop a few things:

– proxy smell –> people need something to sniff danger, such as food burning, fires, chemicals
– proxy for biochemical signaling –> are people who cannot smell going to have less social engagement due to the inability to smell others?

I am just thinking out loud.


More evidence of long-term loss of smell…
There are more studies and anecdotes emerging of COVID-19 long-term loss of smell.  The NY Post article below talks about how some have not recovered their sense of smell, even after 12 months.  For those suffering, it is creating problems, including a loss of interest in eating (can’t taste) and social anxiety (do they smell?).  And also, concerns because they cannot smell food burning, nor dangerous smells.

Source: NY Post


And I was surprised by this University of California Merced article noting that loss of smell happens to >70% of COVID-19 users.

Source: https://www.universityofcalifornia.edu/news/connection-between-covid-19-and-loss-smell-uncovered-research-team