First Word

COVID-19 UPDATE: US cases still rising and hospitalizations surge, so wave 3 still strong. Cyclical rally is a glimpse of a post-COVID world

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

STRATEGY: Cyclicals are gaining favor in markets
Cyclical stocks rallied strongly yesterday, a reaction to multiple positives on the healthcare front:

– Moderna vaccine candidate >94% effectiveness, exceeding that of the Pfizer drug
– Good news on Olumiant (see comment yesterday)

And yesterday’s market reaction is a glimpse of how investors will be positioned, when the world is able to vanquish COVID-19.  At the moment, no country has achieved durable herd immunity, but several have managed to contain the virus.  That is, several countries have successfully prevented the spread sufficiently, that they are essentially disease free.  The most notable examples are China, Taiwan, Australia, but many Southeast Asian nations have reduced cases to zero.  This is not the case in the Western world.  Europe is starting to see cases rollover, stemming from renewed lockdowns.

As for the US, daily cases are rising at >35,000 per day (vs. 7 days ago) and at this pace, the US will see >200,000 cases before Thanksgiving.  We are watching trends carefully, particularly in wave 3 states, led by WI, IL, ID, ND, SD, UT, or WIINSU, but these are only the states with the fastest case growth.  The entire US is seeing cases rise.  So this wave 3 could become horrendously bad, if cases continue to accelerate everywhere.  I want to emphasize that this is not the case at the moment.  Cases are rising in states affected worst in wave 1 and wave 2, but the amplitude is not nearly as pervasive as those prior episodes.

– the chart below puts this in perspective, showing daily cases per 1mm residents (7D avg)
– as you can see, while cases are rising everywhere, it is the worst in WIINSU

COVID-19 UPDATE: US cases still rising and hospitalizations surge, so wave 3 still strong. Cyclical rally is a glimpse of a post-COVID world


Source: COVID-19 Tracking Project and Fundstrat


In the meantime, the cyclical stocks seem to rise the most when we get a glimpse of the post-COVID world — vaccine progress, etc.  I think investors need to heed this.  

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), Sluymer (Technicals)
– Biden vs Trump  –>   based on correlation to either candidate odds

Granny Shots:
Full stock list here –> Click here

Trifecta Epicenter:
Full stock list here –> Click here

Biden White House vs. Trump White House:
Full stock list here –> Click here







POINT 1: Daily cases 147,084, +30,064 vs 7D ago — on pace to hit 200,000 by mid-Nov
The latest COVID-19 daily cases came in at 147,084, up +30,064 vs 7D ago. Wave 3 is gaining momentum, so we are not really near a peak in daily cases

– the spread of cases across the US is widening
– the fastest spread remains in the wave 3 states, in particular, WI, IL, ID, ND, SD, UT, or WIINSU.
– but other states are seeing higher cases and dominating top 10 are essentially all previously “unscathed” states
– we all should be cognizant that cooler weather is making spread faster, perhaps due to weaker immune systems or “indoor” time


COVID-19 UPDATE: US cases still rising and hospitalizations surge, so wave 3 still strong. Cyclical rally is a glimpse of a post-COVID world


Source: COVID-19 Tracking Project  and Fundstrat


7D delta is now running at >35,000, which means we could be at 200,000 cases in two weeks
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,
– It is rising at >35,000 7D delta

At this pace, we could see daily cases rise to >200,000 within two weeks.  So wave 3 is clearly gaining momentum.


COVID-19 UPDATE: US cases still rising and hospitalizations surge, so wave 3 still strong. Cyclical rally is a glimpse of a post-COVID world


Source: COVID-19 Tracking and Fundstrat  

We have been looking at different ways to give the best context to Wave 3.  Up until now, Wave 3 for COVID-19 differs from Wave 1 and wave 2 for several reasons:
– it is spreading across states previously unscathed in wave 1 and wave 2
– it is more geographically disperse but mostly in the Mountains region
– 6 states are seeing the fastest spread, WI, IL, ID, ND, SD, UT, or WIINSU
– Unlike Wave 1 and wave 2, states caught up in wave 3 are largely laissez-faire, without any policy intervention

New:
– Daily cases per 1mm for wave 1 (NY tristate) and wave 2 (F-CAT) are identical for the first time


COVID-19 UPDATE: US cases still rising and hospitalizations surge, so wave 3 still strong. Cyclical rally is a glimpse of a post-COVID world
COVID-19 UPDATE: US cases still rising and hospitalizations surge, so wave 3 still strong. Cyclical rally is a glimpse of a post-COVID world


Source: COVID-19 Tracking and Fundstrat  



COVID-19 UPDATE: US cases still rising and hospitalizations surge, so wave 3 still strong. Cyclical rally is a glimpse of a post-COVID world

Source: COVID-19 Tracking and Fundstrat




POINT 2: Wave 3: Hospitalizations are rising but the highest rate is in NY tristate area
Daily deaths are rising in the US, and foremost, this is a stark reminder that COVID-19 remains the same deadly disease that has killed nearly 1 million people globally.  And the fact that death rates are not as high is a good thing in the US, but deaths are still occurring.

– Daily deaths are about to surpass Wave 2 peak, but not quite at Wave 1 levels
– It is not a foregone conclusion that daily deaths will surpass wave 1

Aggregate hospitalizations are at an all-time high.  And this is not a good omen, as this does suggest we should see a rise in mortality.  There are mitigating factors, including new treatments (see our comment yesterday on some new drugs, including Olumiant, which cuts mortality by 71%) but the fact is, rising hospitalizations is an omen of rising deaths.

COVID-19 UPDATE: US cases still rising and hospitalizations surge, so wave 3 still strong. Cyclical rally is a glimpse of a post-COVID world


Source: COVID-19 Tracking Project and Fundstrat


And if we looked at where the total number of hospitalized (aggregate), we can see that wave 3 hospitalizations are primarily in states that did not see high levels of hospitalizations in wave 1 and wave 2.  In other words, it is in states that are essentially facing this outbreak in full force in the way they did not see during anytime in 2020.

– about 1/3 of the 77,000 hospitalized in the US are in wave 3 states (see below)
– and states involved in wave 1 and wave 2 are seeing much lower levels of hospitalized (TX is the exception)

COVID-19 UPDATE: US cases still rising and hospitalizations surge, so wave 3 still strong. Cyclical rally is a glimpse of a post-COVID world


Source: COVID-19 Tracking Project and Fundstrat


As for the rate that COVID-19 infected are hospitalized, we can see that the rates are actually higher in NY tristate area.  About 2% of COVID-19 confirmed cases are hospitalized in the NY tristate area,  compared to 1.3% for the wave 3 states.

– both figures are relatively low, as this is about 1 in 100 patients hospitalized in wave 3 states
– and 1 in 50 for NY tristate.

COVID-19 UPDATE: US cases still rising and hospitalizations surge, so wave 3 still strong. Cyclical rally is a glimpse of a post-COVID world


Source: COVID-19 Tracking Project and Fundstrat


And at the state level, we see that NJ is the highest among the NY tristate area.  It is roughly matching Texas.

COVID-19 UPDATE: US cases still rising and hospitalizations surge, so wave 3 still strong. Cyclical rally is a glimpse of a post-COVID world


Source: COVID-19 Tracking Project and Fundstrat



POINT 3: Positivity rate is now 11.5%, and rising
To appreciate the seriousness of wave 3, we can also look at the positivity rate.  This is a measure of spread, as long as testing capacity is adequate.  And the WHO defines under 10% as a level of contained spread.

– the US positivity rate is 11.5% and rising
– this is above wave 2 but below the 25% levels seen in Wave 1
– this is a key figure to watch


COVID-19 UPDATE: US cases still rising and hospitalizations surge, so wave 3 still strong. Cyclical rally is a glimpse of a post-COVID world


Source: COVID-19 Tracking Project and Fundstrat


The rise in positivity rates is led by wave 3 states, which are running at nearly 20%.  And wave 1 (NY tristate) and wave 2 (F-CAT) are still below 10%.  Unfortunately, the rates are rising across the US.  So the spread of the disease remains high

– stay vigilant!

COVID-19 UPDATE: US cases still rising and hospitalizations surge, so wave 3 still strong. Cyclical rally is a glimpse of a post-COVID world


Source: COVID-19 Tracking Project and Fundstrat

More from the author

Disclosures (show)

Stay up to date with the latest articles and business updates. Subscribe to our newsletter

Articles Read 1/2

🎁 Unlock 1 extra article by joining our Community!

Stay up to date with the latest articles. You’ll even get special recommendations weekly.

Already have an account? Sign In

Don't Miss Out
First Month Free