Click HERE to access the FSInsight COVID-19 Daily Chartbook.
STRATEGY: Cyclical trade: Trump vs Biden portfolios. Trump favored
The focus of this note is the 2020 Election results. We will be sending this note without having any conclusions on the winner of the White House and the outcome for the Senate. Polls and the media have been calling for a Biden/Blue wave landslide. And early voting results so far, are not really showing this.
In fact, betting markets have completely flipped with Trump favored at 69.5%.
– Equity futures are up and NASDAQ >3%
– We think strongest rally would be a “surprise” Trump win and equities rally 15%-17% into YE
– This looks like the scenario at the moment
Source: electionbettingodds.com
To me, the biggest takeaway is the massive, absolutely massive failure of polling. This is a big money business and is used to influence behavior and financial markets. And these polls have been dead wrong again — an indictment of polling. Our Washington Strategist, Tom Block, has not trusted polls in the world of cell phones (geolocation) and social media.
How can all these “live polls” get 1,500 results per week? This implies 33% US contacted during a 33-week election cycle…
In fact, I personally do not know a single person who has ever been contacted by a pollster. Not one. And when I did a twitter poll on this subject, only 5% said they ever got contacted for an election poll.
This is why the poll math simply doesn’t make sense. Here is my “back of the envelope” math:
# polling firms 30
avg sample 1,500
% calls answered 5%
Total calls/ week 900,000/week
# weeks 33
# eligible voters reached 33 million
% voters 33%
So, if 30 polling firms conduct real polls weekly, we should have been about 33% of eligible voters contacted. By my observations, I know zero. And I never ever received a call or did a poll. And according to my twitter poll (~10,000 responses), only 500 ever got contacted.
Does this math make sense? I really wonder who is answering these polls.
Cyclical stocks are the best bet either way into YE and maybe in 2021…
We have written about the fact that cyclical stocks might be the best bet into YE, post-election. And of course, the fact that equities are likely to rally into YE (Santa Claus + stimulus + cash on sidelines). And regardless of who wins the White House, below is the rough timeline for markets into YE.
– into YE, fiscal stimulus fuels a cyclical rally
– early in 2021, economic momentum should be stronger, coupled with easing COVID-19 fears = cyclical rally
Source: Fundstrat
Cyclical Portfolio based upon either a Biden or a Trump win…
Our data science team, led by tireless Ken, calculated each sector’s sensitivity to either election betting odds for Biden or Trump (not exactly inverse in each case). The betting odds are shown below, based on the data aggregated by electionbettingodds.com.
Top 30 industries positively correlated to a Biden win…
The 30 industries most positively correlated to a Biden win are shown below. This is based upon “beta” to Biden movements in the betting markets. The top 5:
– Healthcare supplies
– Diversified real estate
– Brewers
– Motorcycles
– Social media
Source: Fundstrat and electionbettingodds.com
For Trump, the following are the 30 most correlated to Trump betting odds. The top 5 are:
– Mortgage REITs
– Leisure facilities
– Oil & gas transportation
– Hotels, resorts, cruise lines
– Oil & gas refining and marketing
Interestingly, it looks like Cyclicals are actually more strongly tied to a Trump win compared to a Biden win.
Source: Fundstrat and electionbettingodds.com
STOCK LISTS: BIDEN VS TRUMP
23 “Biden White House” Stock ideas (*)
Tickers: GRMN, UEIC, AAN, RH, BKNG, EXPE, HOG, NEM, RGLD, JOE, PSB, WRE, JBGS, OPI, AIV, CPT, SAM, WBA, CCRN, CVS, AVNS, VIVO, LMNX
(*) Please note that the stocks in the list above 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.
Source: Fundstrat
27 “Trump White House” Stock ideas (**)
Ticker: LVS, MGM, PHM, TOL, CCL, NCLH, RCL, MAR, HLT, WH, WYND, SIX, LMT, NPK, DAL, JBLU, LUV, MTRX, NOV, EOG. PXD, GPRE, REGI, AGNC, NYMT, RMAX, ANDE
(**) Please note that the stocks in the list above 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.
Source: Fundstrat
POINT 1: Daily cases 86,252, +15,090 vs 7D ago — 7D delta still rising
The latest COVID-19 daily cases came in at 86,252, up +15,090 vs 7D ago. Daily cases are still rising non-parabolically in the US. This is a contrast to Europe. Given the election is the focus tonight, we are not going to spend too much time on this.
Source: COVID-19 Tracking Project and Fundstrat
7D delta cooled off over the weekend… the weekend effect?
Again, the daily change vs 7D ago, in our view, is the leading indicator as it is what influences the 7D moving average.
– Daily cases are rising vs 7D ago,
– last week, it looked semi-parabolic
– over the weekend, it looks a lot better
– is this the weekend effect?
Source: COVID-19 Tracking and Fundstrat
Source: COVID-19 Tracking and Fundstrat
Source: COVID-19 Tracking and Fundstrat
POINT 2: Hospitalizations rising but the “coefficient” is still only 1%
While COVID-19 cases are soaring and hospitalizations are rising, the rate of incremental hospitalizations is still shockingly low. That is, we are at all-time high in cases, yet, only about 1% of incremental cases are being hospitalized.
– this figure has stayed flat as a pancake at 1%
– this was >3.3% in wave 2
– and was >13% in wave 1
So COVID-19, while seeing a massive rise in cases, is not creating incremental healthcare severity that we saw in the prior waves.
Source: COVID-19 Tracking and Fundstrat
But the total number hospitalized patients keeps rising. So the absolute level of patients is going up and this tells us that there is still a growing burden of those needing care. But the number of cases is far higher in this wave than wave 1 and wave 2, and we should expect more to be hospitalized.
And this hospital burden is primarily in the wave 3 states. As shown below, the number of hospitalized in wave 1 and wave 2 states is nowhere near their prior peaks.
– the upper chart is hospitalized in absolute numbers
– the lower chart is hospitalized per 1mm residents
Source: COVID-19 Tracking and Fundstrat
POINT 3: New study finds 100% of infected have T-cell immunity –> big deal
The UK Coronavirus Immunology Consortium (UK-CIC) published an important study on T-cell immunity today. The timing is unfortunate because it is going to be lost among all the focus on the 2020 Presidential election. Still, we want to highlight some key points:
https://www.cnbc.com/2020/11/03/t-cells-responding-to-covid-19-six-months-after-infection-study-finds.html?__source=iosappshare%7Ccom.tinyspeck.chatlyio.share
– 100 individuals studied
– 100% had T-cell response showing “robust cellular memory”
– Strongly supports the argument of herd immunity
This latter point is key. And tying in the fact that Southeast Asians have not experienced COVID-19 the same way seen in the Western world, suggests that t-cells might explain this as well. If herd immunity exists, particularly via T-cells, this supports much of the work done by other scientists, which had been “discredited” by mainstream media. In fact, many scientists have openly questioned whether this was true. So this study is a positive development.
The potential for t-cell herd immunity also suggests that we could see COVID-19 reach that infection break point that many are looking for.
The study was published on November 2, 2020. And the front page is shown below. T-cells are the long-term memory of the immune system. Prior studies showed that antibodies to COVID-19 faded quickly. But if t-cell memory remains in place, the body maintains some level of immunity.
https://www.uk-cic.org/news/cellular-immunity-sars-cov-2-found-six-months-non-hospitalised-individuals
The key statement is below. The study ended at 6 months, so it is not saying T-cells only last six months.
