COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials

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

For the past few weeks, even as the US saw its peak in daily COVID-19 cases, it has been easy to dismiss the change in trend.  Foremost, nobody wants to be “fooled twice” and this disease is indeed mysterious and unpredictable.  And some suggested cases were only falling due to lower testing.  And then some could point to the fact while the epicenter, FL, CA, AZ, TX, or F-CAT, was peaking, other Midwest and Southern states were surging.  And the seasonality of case reporting makes trends hard to see. Still, others argued that deaths would soon surge.  But it looks more and more decisive case trends are now definitely improving.


Daily cases fell to the lowest levels since early July and for a “Monday” is the lowest Monday in 6 weeks and the lowest overall cases since June 29th.  That is good progress.  So, the trend in COVID-19 is on a confirmed and sustained decline.  The drop-off in cases (vs 7D ago) is flat.  But we think this is more a simple reporting anomaly.  If daily cases on Tuesday come in at ~49,000 (flat vs 7D ago), then this is a trajectory that we did not expect.

COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials


Source: COVID-19 Tracking Project and Fundstrat


This may be purely anecdotal, but I have noticed more Americans getting tired of the constant doom and gloom.  This tweet from @AdamSinger is one of many I have seen recently.  In a sense, this is Americans shifting from seeing the world “half-empty” to “half-full” and if this translates into market behavior, we can expect stock multiples to expand rapidly.
 

COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials


https://twitter.com/AdamSinger/status/1292805305257144322

As for why this is happening, we are not sure.  But the fact is, there have been many “experts” forecasting chronic doom and calamity stemming from COVID-19.  The economy is in shambles and there is going to be a massive wave of small business closures — an economic tragedy that is completely due to COVID-19.  However, these losses of capital do not doom the broader economy.  Quite the opposite.  Creating losses means incremental capital has a chance to realize better returns (perhaps with less capital).  After all, the rise of FANG did not come with widespread prosperity — the best US companies decimated whole industries and sectors.

Fall changes = school wave + college sports canceled
Life is also not necessarily going back to normal in the Fall.  Big Ten has canceled football season (as reported by the Detroit Free Press), which is a blow to American culture and leisure.  There are few things more Fall ritual than the start of college football season.  And on top of that, we know there will be risks of a second wave with the return to school.


COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials


Source: Detroit Free Press



STRATEGY: The potential violent Cyclical rotation is just a typical cycle…
Last week, we discussed how it took 20 days from the April peak in cases before we saw the surge in epicenter stocks (see below) and if such a scenario played out today, this would imply the latest date for an epicenter rally would be 8/14.  And given the skepticism on the group and the general disdain for cyclicals, we believe such a rally would be monstrous — similar to what we saw in May.


COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials



One of our summer interns, CJ Woodberry, a CS major at Dartmouth, pulled together some data regarding the performance of large-cap Technology vs Industrial stocks by decade.  Rather than capture index level returns, we asked him to look at the cohort of large-cap stocks and calculate the median return of Technology and Industrials over 10 years.

This is what surprised us.  There is a pretty regular pattern of Technology leading one decade followed by Industrials in the next decade.

– In the 10 years through today, Tech beat Industrials by 109%, reversing the entire Industrial outperformance post-dot-com.


The future is uncertain, but it is probably a worthwhile conjecture to think Industrials will trounce Technology in the next decade.  That is, if this pattern continues.

COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials


Source: Fundstrat



But we also asked CJ to compile something else.  What percent of Industrials and Technology stocks fell 90% over that decade?  We want to get a sense of how much survivorship is in these groups.  Or rather, how many of these companies get obliterated over time.

– Surprisingly, Industrials have a high survivor rate — only 13%, or 1 in 10 end of falling 90% (collapsing).
– But this figure varies wildly with Technology stocks.  It was 36% in the 10-years post dot-com.

COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials


Source: Fundstrat



POINT 1: Daily cases at 41,822 is the lowest since June 29th
Daily cases fell to 41,822 on Monday, which is the lowest number of cases since June 29th.

COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials


Source: COVID-19 Tracking Project

The decline vs 7D ago, however, is modest and down only 447.  Is this a one-off, or are cases not improving?  We will know better Tuesday and I prefer not to conjecture.  After all, COVID-19 remains a very mysterious disease.

COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials


Source: COVID-19 Tracking Project



We are adding a new table.  This is looking at the states with large increases and decreases in 7D delta of daily cases.  As shown below, the states causing 7D delta to slow are really CA and MO (MO didn’t report new cases over the weekend due to the system upgrade, so Monday’s cases represent the past three days).  But the magnitude of other states is really modest.  It argues against some other states seeing a new surge.


6 States with Largest 7D delta in daily cases
California       7,751 vs 5,739   +2,012
Missouri         2,575 vs 1,047   +1,528
Alabama         1,686 vs 1,217      +469
Tennessee       1,202 vs 1,009    +193
Georgia            2,429 vs 2,258    +171
Colorado            379 vs 252         +127
Total 6 states                              +4,500


6 States with Largest 7D delta in daily cases 
Texas                    4,455 vs 5,303   -848
North Carolina           626 vs 1,313  -687
Virginia                    663 vs 1,324    -661
Florida                 4,155 vs 4,752     -597
Louisiana               562 vs 1,099     -537
South Carolina        724 vs 1,163   -439
Total 6 states                                -3,769





Daily deaths are showing declines vs 7D ago as well, so despite the lag expected for deaths, we have not seen the associated surge in deaths, despite daily cases blowing way past new highs.

COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials


Source: COVID-19 Tracking Project




COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials


Source: COVID-19 Tracking Project




POINT 2: 55% of the USA has >12,500 cases per 1mm (or our informal “infection break point”)?
You might recall a few weeks ago we talked about how we informally viewed a case prevalence of 12,500 per 1mm (1.25% detected cases as % of the population) as the level of prevalence where community spread can slow, due to the high level of existing prevalence.  This has a lot of assumptions, including the fact that we think someone has some short term immunity, after catching the disease.

COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials


Source: COVID-19 Tracking Project


Based on county data, about 55% of the US (based on the sum of the county population) reached this prevalence level.  If we used 12,500 as a benchmark (akin to “infection break point”), then over half of the US counties have such a high level of community spread, that these are less at risk for a large new spread.  In other words, these places could be somewhat less vulnerable to a second wave/ flu season/ back to school.

COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials


Source: Johns Hopkins and Fundstrat


At the state level, it seems like cases slow for a state when this about 70% of a state has >12,500 cases per 1mm residents.  See below.

– Notice NY tristate + MA + RI rose to >70%.  And since then, cases have slowed
– F-CAT is now at 70% and we are seeing cases slow.

So perhaps this level is worth watching.

COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials


Source: Johns Hopkins and Fundstrat

So the takeaway, in our view, is that it seems like 12,500 seems to represent some benchmark.  It seems to mark when cases begin to slow for some areas — NY Tristate and for F-CAT.


POINT 3: Americans are traveling again = good
Americans are beginning to travel again, after a 4-5 week period of “hunkering” down.  As the TSA checkpoint data shows, travel throughput was flat from July to now, as the surge in COVID-19 cases, along with the associated concerns, led to a travel slowdown.

– But recent travel data is now surging and made a new post-COVID high.
– this has coincided with a decline in COVID-19 cases, so this is logical.

COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials


Source: TSA


This increased willingness to travel is showing up in survey data as well.  As our clients know, we look at the data from Destination Analysts and their >1,000 weekly survey offers good insights. This question regarding the “perceived safety of travel” offers quite a lot of insights.

– Since 7/17, the perceived safety of travel has improved.
– this coincides with the daily case peak seen 7/24
– In fact, the last time this improved was 4/10 to 6/5


COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials


https://www.destinationanalysts.com/


That last period, 4/10 to 6/5 nearly perfectly coincides with the outperformance of epicenter stocks.  In other words, this might be the survey that bears watching as this perception of safety is also clearly tied to consumer behavior.

This chart below shows the breakdown of consumer willingness to travel, and it is a distribution matrix.  For any given week, the percentages total 100% and the higher numbers represent tiers of consumers willing to travel.

– Since early July, the ratio of consumers “ready to travel” and “waiting to travel” is up
– this is a positive trend as it obviously suggests a level of pent-up demand.

COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials


https://www.destinationanalysts.com/


If travel does resume, we should see this exponential recovery in travel demand resume.  After consumers “hit the pause” in July, it bears watching whether this uptrend continues.

COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials



Source: TSA




RANDOM: ‘Cancel culture’ going galactic, forcing NASA to rename planets and stars 
The cancel culture has become epidemic in 2020, partly because people have more time to police other people.  And there are many positive aspects to this movement — sexual harassment, BLM, racial injustice.  But this cancel culture has the obvious dark side — holding people accountable for mistakes in the past, even if those supposed infractions were acceptable in the past.

This movement has not caught up to NASA.

Going forward, NASA will rely primarily on scientific names for stars and planets.  They have already renamed two bodies:

– “Eskimo Nebula,” now becomes NGC 2392.  This was discovered in 1787 by William Hershel!
– “Siamese Twins Galaxy” will be known only as NGC 4567 and NGC 4568.

The “Eskimo Nebular” was named 243 years ago.  So this means in the future, when someone comes across any texts written between 1787 and 2020, a full 243 year span, and they see this term, it will be a complete mystery what this is referring to.

COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials

https://nypost.com/2020/08/08/nasa-to-remove-offensive-names-from-planets-and-other-heavenly-bodies/?utm_campaign=iphone_nyp


Scientists and astronomers are known for their eccentric humor and tastes.  I think it is really disappointing to see this. Elon Musk and SpaceX have really reignited interest in space and NASA.  And if we continue to discover new planets, systems, stars, etc., I think naming these as NGCxxxx is going to be BORING.


By the way, if I had to nominate a planet that really needs to be renamed — it is the one we always made jokes about in school. 

COVID-19 UPDATE: Daily cases fall to lowest since June 29th, definitive downtrend in cases. Industrials vs Technology is cyclical, suggesting 2020-2030 led by Industrials

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