COVID-19 UPDATE: NYC cases COLLAPSE to 1,188, down 84% from the peak. Grom survey shows 44% willing to go to the restaurant w/o vaccine.

COVID-19 remains a global crisis and we realize that many people need to keep up with COVID-19 developments, particularly since we are moving into the more critical stage (“restart economy”), so feel free to share our commentary to anyone who has interest.



Ever so incrementally, the US economy is opening up.  By our tally, 24 states representing ~54% of GDP (see table from yesterday).  But opening the economy is not what matters.  The ‘biggie’ three questions are:

– The contour of the recovery — will consumers be resilient?
– Pace COVID-19 recedes and healthcare solutions develop;
– Financial conditions, funding business during next 2-3 quarters and access to capital (will sports teams IPO?)

This adds up to uncertainty.  And we do not have the answers and nobody can really know the future.  But the data, evidence and analysis our team has done, led by tireless Ken, shows the potential for a strong recovery.  In fact, one that could track above consensus.  And as such, we have tended to view the “strength” in equities as potentially suggesting this path.

We got some very good news on NYC today.  The daily case count came in 1,188, a massive downside break to the downside and now 84% from the 4/9/2020 highs of 7,520.  NYC and NY state now look well into the recovery phase of COVID-19.  In fact, NJ is now the #1 state in reported daily cases, overtaking NY for the first time.

Chuck Grom, a well known and respected broadlines/hardlines analyst at Gordon Haskett, published his COVID-19 household survey (4th one).  The most surprising takeaway, for us, is that ~40% households are willing to go to a restaurant/mall without a vaccine.  That is huge number.  As our wallet breakdown shows, both are top 10 “uses” of a consume wallet –> restaurants #7 and apparel/malls #10.  In other words, the survey is showing consumers might be quite willing to re-engage post lockdown.

We also should not ignore the fact oil has surged +$62 per barrel in the past 2 weeks.  Yup.  $62 increase in the price per barrel to $24.50 (it was -$40 two weeks ago).  Fortunes are no doubt being minted by that price move.  But we also think this is signal.  Just like the crash in oil on the evaporation of demand was justified, a $62 surge does follow demand gains.  TSA passenger traffic has 2X in the past 2 weeks.  And oil has never moved this much in 2 weeks.  The closest was $18/barrel during ‘Arab Spring’ 2011.

POINT #1: NYC sees downside break in daily cases -84% and Kentucky and Nebraska see 4X and 2X rise (too early to worry).

NYC cases fall to 1,188, down 84% from the peak of 7,520 on 4/9/2020 and a downside breakout of the 2,000-range for past 7 days
NYC daily cases collapsed today to 1,188, breaking below the 2,000 range seen for the past 7 days and now down 84% from the peak seen on 4/9/2020 (a month ago) of 7,520.  It looks like NYC is finally past the “apex” and moving rapidly towards healing. 

This positive case development was kind of lost in the DeBlasio press briefing.  NYC Mayor DeBlasio focused on complaining about the need for more federal aid and holding up the cover of the NY Post (below).

– But this is a turning point for NYC. Recall, NYC is the worst hit of any metro area and the city showing the slowest progress.
– Today, the MTA will actually shutdown the subways to sanitize them.

Source: NYC Health Dept.

Cities and states are in dire financial situations.  So DeBlasio’s comments have some merits.  And this is going to be a really tricky situation.  States make money from taxes and fines and fees.  And all of those are a function of a moving economy (not shutdown).  And unlike the Federal govt, they cannot run deficits and print $$$.

Source: NY Post


For the first time since the pandemic, NY state is no longer #1 in daily reported cases…
In perhaps the best sign that NY state is showing meaningful and sustained gains, it is no longer #1 in daily reported cases.  NJ is now reporting the highest number of COVID-19 cases, with 2,324 reported today (vs 1,525 yesterday) and NY state is #2 and actually pretty close to Illinois.  

– Kentucky reported a 4X rise in cases to 625 from 163.  The reason is not that clear.  We will watch.
– Nebraska 2X to 528.  Nebraska is opening its economy this week (see yesterday’s FLASH).  Yikes.

Source: COVID-19 tracking project



Overall cases in the USA were FLAT at 22,479 compared to 21,831 yesterday…
The US total cases was flat with yesterday at 22,479 and as the state breakdown above shows, there were 3 notable changes.  NY #2 now.  Nebraska and Kentucky reported large surges.  

Source: COVID-19 Tracking project


POINT #2: Survey by Chuck Grom, Broadlines/Hardlines analyst at Gordon Haskett, shows Americans surprisingly willing to go back to restaurants and malls even without a vaccine…

~40% (surprisingly large) consumers willing to visit Restaurants + Malls and +24% higher w/ vaccine… 
Chuck Grom is a well known Broadlines and Hardlines retail analyst at Gordon Haskett Research Advisors (GHRA).   I have known Chuck for nearly 20 years from my days at JPMorgan and he has always done really great differentiated work.  He has been conducting a weekly survey of households since March asking the same basket of questions over those surveys.  And over the course of surveys, he has seen some shifts in consumer spending. 

The latest commentary is 11 pages and it is a pretty useful read.  Some insights that jumped out to us:

– Grom found consumers are starting to spend on “discretionary items” (presumably less on panic/armageddon) (below)

– And while the discretionary dollars are being spent, less of it is on ‘big ticket’ items, but more towards smaller home-related items

The online categories are shown below and each category represents a diffusion (% of customers responding “yes”).  There is a rise in each of the categories, except for household essentials.

Perhaps the most interesting thing are the activities consumers would do (or not) without a vaccine… 44% YES to a restaurant
Grom also asks households which of the activities they would be willing to do, even without a vaccine. The 8 categories are shown below and YES and NO reflected both with and without a vaccine.  And he has the ‘delta’ on the right-most column.

I was pretty surprised to see the percentages “yes” for some categories.  Households that are willing to do the following, without a vaccine:

– Restaurants      YES 44%
– Off-mall stores  YES 41%
– Malls                 YES 39% 

These are really high percentages and according to Grom, have risen steadily over the past 4 weeks. If this data is correct, the consumer is going to pretty resilient.  In fact, these numbers might be higher a month from now.

But some things look they nay not come back for some time.  These are % NO answers, without a vaccine:

– Cruise ships      NO 77%
– Planes               NO 73%
– Stadiums           NO 72%
– Bars                   NO 72%
– Gym/Fitness      NO  65%

Why bars are much lower in willingness vs a restaurant is not clear.  And it looks likes Americans are not all that attached to the Gyms, if 65% will not go back if there is no vaccine.

Of all those categories, “Mall” + “Restaurants” are largest share of outside spends (+3% and +5.6%)…
We took the BLS Consumer Expenditures Survey and condensed the 1,100 lines of consumer spending into 50 categories shown below.  And we highlighted the top 10 with a dashed line and the top 20 with another dashed line.  And the “social distance” victim categories with a red bar (vs grey for everything else).

From Grom’s survey, the 3 categories of ~40% YES were malls and restaurants. These are actually the most important categories.

– Restaurants, or “Food away from home.” is 5.6% of the wallet
– Apparel (aka mall) is 3% of the wallet

Thus, these are both significant and among the top 10 items of the consumer wallet.  The highest is shelter, and cars.  In the other things that are “social distance” taboos are much further down the wallet. Even bars is pretty far down the list.
  

Source: BLS Consumer Expenditures Survey



Reminder, the “social distance” victim spend categories total $717 billion or ~6% of total Consumer PCE of $17 Trillion
As a reminder, based on the BLS CES, the “social distance” taboo categories (detailed below) total $717 billion.  Again, Housing, Transportation and Food are the bulk of a consumer’s wallet currently.

POINT #3: We cannot ignore fact that WTI spot oil has risen +$62/barrel in 2 weeks, a ‘monstrous’ gain… to $24.46/barrel (ahh)

Never in the past 40 years, has oil gained +$60 per barrel in 2 weeks, next closest is +$18/barrel around 2011 ‘Arab Spring’
Oil has rallied massively in the past 2 weeks, increasing by $62.09 per barrel.  But since the price was -$40 per barrel on 4/20/2020, the $62 increase brings the price to ~$24.50. 

Still, how many times in an oil trader’s career has oil moved $62 in two weeks?  We have to think that some traders have bagged a massive win — $62 rise in 2 weeks (after a similar $62 drop in 5 days).

Source: Bloomberg

So has oil ever rise +$62/barrel in a 2-week period?  Nope.  Since 1983, there has never been a move this large. The next closest is $18/barrel in March 2, 2011 — back then, it was the Arab Spring (Egypyt, Libya, Yemen, Bahrain) and propelled oil to $100 per barrel.  

Source: Bloomberg

Of course, on the surface, we can easily dismiss the $62 per barrel rise as “snapback” to normal after falling to a negative WTI price.  But recall, many oil experts called the slump justifiable, explaining that the world was awash with oil and there is no more room for storage.

If that was the logic behind the collapse, then the +$62 rises should not be so easily dismissed as a “technical bounce.”  I can’t explain this, and commodities are very difficult to project because supply and demand dynamics play such oversized roles. But some things have changed in the past 2 weeks:

– US incoming data is less bad
– US airline traffic has begun to turn up (see below)
– Mobility data is showing queries for ‘driving directions’ is up
– China activity levels are continuing to bounce (see below)

TSA traveler throughput has doubled since bottoming at 87,534 on 4/14/2020 and now at 163,692…
TSA has reported traveler throughput since the start of the COVID-19 outbreak and reports this information daily.  This figure collapse from ~2mm per day pre-COVID to a mere 87,534 on 4/14/2020.

– since then, traffic has steadily increased and has now doubled to 163,692.  
– in the forthcoming weeks, states are relaxing the lockdowns, more Americans will venture out

Thus, this TSA traffic data should show pronounced increases in the coming weeks and months.

source: TSA


Goldman Sachs economists show that China Economic April activity is back to 80% of the 2019 levels pre-COVID…
Goldman Sachs Economists have noted a pretty sizable bounce in China economic activity (their proxy is ELI) since February.  Their data includes 9 secondary and tertiary industries to measure this activity.

According to GS, economic activity has rebounded quickly and they even posit if the West manages a partial success similar to China, we should see sizable sequential growth.

Several China industries have seen activity rebound to pre-Feb levels, including mining and Utilities, Construction and Real Estate is close.

source: Goldman Sachs



STRATEGY:  We still believe the market has shifted into the hands of buyers (positioning still shows persistent caution=good).  Some “high conviction” ideas from Brian Rauscher, Head of Global Portfolio Strategy.
We hosted a webinar/call last week (if you missed it, we can send details for the replay and the slides) and our strategy team recommended investors “barbell” with secular growth (FANG, etc) and epicenter stocks.  We also discussed some thematic ideas like “operating leverage” and “de-urbanization” etc.

And if Chuck Grom’s data is correct, the consumer is going to be a lot more dynamic than most expect.  And if so, the “epicenter” stocks will considerably outperform.

I asked Brian Rauscher for some high-conviction ideas.  Brian runs several proprietary models, among them HALO and ASM.  And these can be used to generate some high conviction ideas, where the fundamentals are turning positive.  He gave me 3 buckets of names:

– ASM turning up (fundamentals bottoming)
– S&P 500 “contrarian” ideas down 30% from highs
– S&P 500 mid-cap and small-cap ideas down 30% from highs.

This list is below.