COVID-19 UPDATE: Is current US surge of COVID-19 set to peak by end of month? Maybe. IHME revises "second wave" peak daily death forecast to peak at 5,700 vs 12,000 (1M ago)

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

STRATEGY: This current surge in COVID-19, “wave 3,” might peak by the end of October
COVID-19 has proven itself so contagious and so adaptive, that it is potentially proving to be nearly impossible to contain. Granted, those nations which contained the outbreak early, such as Taiwan and many Southeast Asian nations, or those nations which slammed shut its border, like Australia, have managed to keep COVID-19 at bay.  But the citizens of those countries are not really immune, nor protected.  Rather, they are shielded.

And whatever strategy a nation takes, it is a bridge until there is a cure or a vaccine.  And then we can start to picture a true return to normal.  And by the way, in those nations like Australia, China, Taiwan, etc., life looks very very close to normal.

– Check out this pool party in China from August 2020.
– If this was the NYC, we would see felony charges hammered by NY Gov Cuomo

Source: South China Morning Post


The spread of COVID-19 in the US has not allowed this to take place in the US.  And US cases are surging again. But while the majority of US states are seeing cases rise, including NY, the rise in many of these states hardly compares to the scourges seen earlier in the year.  This chart below shows the different tiers of states responsible for the various surges in cases in the US:

Wave 1 (Feb-April 2020)  –> NY tristate + MA + RI
Wave 2 (June-July 2020) –> FL, CA, AZ, TX, or F-CAT
Wave 3 (now)  –> 8 states (or 22 states) are facing huge outbreaks

A few things stand out to us about the waves of COVID-19 cases in the US:
– Regional outbreaks previously peaked at ~350 daily cases per 1mm residents (wave 1 and wave 2)
– If so, the 8 states leading this wave 3 are nearing or exceeding that level now
– Waves seem to peak about 3 months apart
– If so, wave 3 might peak by the end of this month

So that is what we think is the key thing to watch in the next few weeks.  COVID-19 doesn’t have to conform to any rules.  But the reason we think the 350 daily cases per 1mm acts as a “governor” is that state policymakers (governors) panic at that point.  And once they clamp down, and citizens start masking up, we see cases slow. 

So, we are somewhat hopeful that in the next few weeks, we could see this wave 3 reach its natural break point. 

Source: COVID-19 Tracking and Fundstrat   



The end of the month is also the alignment of other key events, most notably the 2020 Presidential election.  Poll after poll is showing Biden and a blue wave as nearly unstoppable.  And betting markets heavily favor Biden.  But as Tom Block, Fundstrat’s Washington Strategist, has said over and over again –> “don’t trust the polls.”

– foremost, who actually answers their cell phone and talks to a volunteer pollster?
– Rasmussen claims they get a 6% contact rate which I hardly believe
– I did a twitter poll and asked who received and answered an election pollster. 
– Barely 5% and I think most of those answered yes, so they could see the rest of my questions
– And that 5% that does answer, is it really representative of the other 95%?
– This is not a random sampling, this is 100 calls and 5 agree to answer
– Something is off on those 5% of people.  

But that is only my opinion.  Below is some useful commentary from Tom Block on this matter.  His key point:

– don’t underestimate President Trump’s chances of victory

Personally, I agree.  I think this race is far, far closer than the polls suggest.  I know this is a trigger statement. 

But don’t accuse me of political bias or being a Republican shill, or even a “Republican apologist.”  If anything, I am a contrarian who listens to the stock market.  The stock market gains this month strongly argue for an incumbent victory.

But as we stated multiple times, whether Biden or Trump wins, the post-election trade is 90% identical.  If Biden does truly follow through with his ~40% tax rate on capital gains (including carried interest), this will actually make asset-based investing far more attractive than asset-light. 

Why?

One can deduct depreciation/capital charge against income — would be a big win for Value stocks.






POINT 1: Is it possible this “wave 3” is rolling over? Maybe… see Point #2
It is possible that this current surge of COVID-19 cases, aka wave 3, might be nearing a peak.  Yup.  We discuss this more in Point #2.  Consider:

– 7D delta in new cases is +5,401, down from +10,374 just a few days ago
– So it looks like the rate of change is slowing sharply
– Point #2, we discuss how the surge is concentrated in a new set of states

Source: COVID-19 Tracking Project  and Fundstrat


US daily cases 7D delta is up but not exponential…
Again, the daily change vs 7D ago, in our view, is the leading indicator as it is what influences the 7D moving average.

– As you can see below, the 7D delta in daily cases is rising but at a much slower pace
– This is not exponential.
– Exponential would be a continued and an increasingly faster rise in cases
– It has not yet happened, but it could

Source: COVID-19 Tracking and Fundstrat  

Source: COVID-19 Tracking and Fundstrat



POINT 2: 8 states “third wave” –> Daily cases peak >350 per 1mm.  Peak this month?
If we look at the spread of COVID-19 in the US, it is really unfolding in three waves.  This is something we have informally referred to, but this is not the common vernacular or naming by policymakers or the media.  But this is our way of providing a framework for the spread:

Wave 1 (Feb-April 2020)  –> NY tristate + MA + RI
Wave 2 (June-July 2020) –> FL, CA, AZ, TX, or F-CAT
Wave 3 (now)  –> 22 states facing outbreak


Wave 1 and Wave 2 peaked at 350 daily cases per 1mm residents (for the local region) and wave 3 the same?
We have marked these on the chart below, showing daily cases per 1mm residents and the tiers of states.

– Daily cases peaked nearly identically in NY tristate (wave 1) and F-CAT (wave 2) at ~350 per 1mm
– The gap between peaks was nearly 3 months
– Will Wave 3 peak this month?

Source: COVID-19 Tracking and Fundstrat  



Policymaker loop might explain why it will peak this month…
It would make sense to see wave 3 peak this month.  Think about the policymaker loop:
– Cases surge towards critical levels, such as 350 cases per 1mm residents;
– Then, states step and impose strict measures;
– Then, R0 drops
– Cases peak

So, the next two weeks are key.  But we think there is a good chance that daily cases will peak within the next few weeks.  This for wave 3. 

– I hope there is not a wave 4….


8 states seem to be hitting that upper limit of daily cases –> when policymakers step in…
At the moment, it looks like a few states are already at that 350 daily cases per 1mm residents.  As we mentioned above, this is roughly where NY tristate and F-CAT saw daily cases peak during their respective waves.  The 8 states are:

– North Dakota
– South Dakota
– Montana
– Wisconsin
– Nebraska
– Utah
– Iowa
– Oklahoma
– Alaska

Source: COVID-19 Tracking and Fundstrat   


Watching these states as a time series, we can see these surges are very recent.  And the key is whether this level marks the peak for these states.  But here is the question:

– Why should daily cases in these states surpass what we saw in NY tristate and F-CAT at the peak?
– Perhaps it is possible if the citizens of these states refuse to cooperate
– But barring that, we may be within 2 weeks of a peak

Source: COVID-19 Tracking and Fundstrat    


Why are these set of states the most important?  Check out the chart below.  We show the 20 states that were not in the earlier waves and as you can see, these 20 states account for most of the increase in daily cases:

– In other words, when this wave of states peak, we will be past the third wave
– hopefully, this is before the end of the month

But again, the future is uncertain

Source: COVID-19 Tracking and Fundstrat     




POINT 3: IHME revises “second wave” daily deaths to 5,700 from 12,000 = good
Exactly a month ago, we hosted a webinar with Dr. Christopher J.L. Murray, the head researcher from the IHME (IHME website healthdata.org).  The IHME is one of the best known COVID-19 forecast firms and their works are used by the White House.  And as we mentioned back then, what makes their work unique are their forecasts for the path of COVID-19:

– infections
– daily cases
– hospitalizations
– deaths
– forecasts can include scenarios such as masks mandate, easing, etc.

We have admired the work of IHME and have used their projections in many of our COVID-19 commentaries.  And we have found their models around infections (vs detected cases) useful.  

Recall, IHME forecasting a brutal flu season… 1.8 million infections daily if restrictions ease…
The IHME is forecasting a massive surge in cases during flu season, which they term “the second wave” and this second wave was expected to far surpass the Feb/March surge — both in daily cases and in daily deaths.

– On 9/14/2020, their forecast was for US daily deaths to reach 12,000 per day by year-end, assuming no new restrictions.
– This compares to the peak of the daily deaths of 2,500 during the darkest days of April 2020.
– So a nearly 6X worse level of mortality.

At the time, it was a truly horrifying forecast.  And our >1,000 clients who tuned in agreed that it was indeed very, very disturbing.  We have provided this chart from that original forecast (posted 9/14/2020).  Even if mandates were not eased, but the current set of restrictions remained in place, IHME was forecasting about 3,000 deaths per day.

– Even 3,000 daily deaths surpass the peak seen in April 2020 of 2,500.

Source: IHME forecast as of 9/14/2020


The latest forecast for daily deaths is provided below.  As you can see, daily deaths are still expected to rise parabolically during the expected “second wave” but with differences:

– Daily deaths are now forecast to peak at 5,700.
– This, while horrific, is now a 2X compared to April 2020 vs 6X previously
– If mandates remain in place, no easing, daily deaths expect to peak under 2,500, below the April 2020 peak

So the good news is that the recent incoming data in the past month is pointing to a considerably better forecast for the IHME’s second wave mortality.  This is due to incoming data points over the past 30 days.  The fact that hospitalizations are not surging is likely a big factor.  If COVID-19 is not leading to a surge in hospitalizations, then we can expect more benign outcomes.

Source: IHME forecast as of 10/14/2020


Earlier this week, we published incremental hospitalizations.  That is, how many newly infected end up in the hospital.  The current ratio is 1%, which is down from 10% seen in April 2020 and 4% seen in July 2020.  So this current wave of cases is only seeing 1 in 100 seek hospitalization.

– And if 1 in 100 is going to the hospital
– Certainly, mortality will be far lower than this.

In other words, as long as this figure stays in the sub-4% range, we expect the incremental mortality to be far lower as well.  After all, if someone is not hospitalized, that person’s chances of death are quite low.

Source: COVID-19 Tracking Project and Fundstrat

Moreover, look at the level of hospitalizations in the states which were the hardest hit in April 2020 and July 2020.
– NY Tristate hospitalizations have been muted and barely rising

Source: COVID-19 Tracking Project and Fundstrat



Similarly, during Summer 2020, 4 states saw the biggest surge in cases, FL, CA, AZ and TX, or F-CAT.
– hospitalized patients per 1mm residents have been falling (except for Texas).

Source: COVID-19 Tracking Project and Fundstrat